Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

SCARBOROUGH BOROUGH COUNCIL BILL

Lords amendments agreed to.

DURHAM CITY COUNCIL BILL [Lords]

Read the Third time, and passed.

BERKSHIRE BILL [Lords] (By Order)

Read a Second time, and committed.

PETERHEAD HARBOURS (SOUTH BAY DEVELOPMENT) ORDER CONFIRMATION BILL

Order for Second Reading read.

To be read a Second time upon Tuesday 23 July.

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Agricultural Land

Mr. Nicholas Baker: asked the Minister of Agriculture, Fisheries and Food if he has received representations about the loss of agricultural land in southern England.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner): I have received no such representations.

Mr. Baker: Is my hon. Friend aware that agricultural land is being lost to development in the south of England at a wholly unacceptable rate? Is she further aware that every acre so lost diminishes our environment and contributes to greater pressure on farmers? Will she add her weight to ensure that that deplorable trend is reversed?

Mrs. Fenner: The Government have a commitment to the protection of agricultural land, and I attach great importance to the protection of such a finite national resource. I am, however, always ready to examine critically the precise methods of implementing the Government's policy in this area.

Mr. Meadowcroft: Does the Minister accept that in southern England, as in Leeds, housing policies have a great deal to do with the loss of agricultural land—

Mr. Speaker: Order. That is what I was hoping would not happen.

Mr. Meadowcroft: I will rephrase my question, Mr. Speaker. For every three old houses demolished, only one

can be built, and that inevitably pushes out development. What talks has the Minister had with the Minister for Housing and Construction—

Mr. Speaker: Order. The question is about agricultural land.

Consultancy Fees

Mr. Stephen Ross: asked the Minister of Agriculture, Fisheries and Food whether he has made any studies on the impact of consultancy fees on small farmers.

Mrs. Fenner: I have recently commissioned an independent survey designed to provide information by farming type and size on the industry's current and future use of advisory and related services.

Mr. Ross: Does the Minister accept that the work of the Agricultural Development and Advisory Service over the years has been much appreciated by agriculturists in. general? When does she expect to introduce the proposed scale of charges? Will she give us an assurance that the charges will not be unnecessarily high and will not include bureaucratic, fastidious extras?

Mrs. Fenner: Professor Bell, in his report. made a point about the excellence of ADAS, but recommended that the beneficiaries of the services provided by ADAS should contribute to the cost of those services. Detailed work on the implementaion of Professor Bell's report is in hand, and my right hon. Friend hopes to be able to make a further statement on progress before the summer recess.

Mr. Andy Stewart: Does my hon. Friend agree that last year alone we spent £53 million on agricultural education and another £8 million on farm training supported by the agricultural training board? Does she agree that it is a misconceived belief held by Opposition Members that all farmers are thick and welcome such unsolicited advice?

Mrs. Fenner: I am sure that our advice and training services are excellent and of great help to our agriculture industry.

Food and Drink Federation

Dr. Twinn: asked the Minister of Agriculture. Fisheries and Food how many meetings he or his officials have had with the Food and Drink Federation in the last 12 months.

Mrs. Fenner: My right hon. Friend or his colleagues have met federation representatives at their invitation five times in the last 12 months. Throughout this period there have been frequent and continuing contacts between my officials and the federation. The most recent meeting at senior level took place on 11 July.

Dr. Twinn: When my hon. Friend next meets members of the Food and Drink Federation, will she be able to give them good news about the imminent introduction of a national voluntary code of practice for nutritional food labelling? Is she aware of the anxiety of people in the industry that the introduction of retailers' schemes, although welcome as a sign of intent, could cause confusion because there is no common standard?

Mrs. Fenner: I am aware that too many systems will confuse the consumer. Comments on the Government's


grant guidelines are being evaluated. The Government have already said that they will consider laying regulations concerning the format of nutrition labelling.

Cereal Prices

Mr. Latham: asked the Minister of Agriculture, Fisheries and Food what is the latest position regarding the negotiations over cereal prices in the Common Market.

Mr. Heathcoat-Amory: asked the Minister of Agriculture. Fisheries and Food if he is satisfied with efforts to reduce the European Economic Community grain surplus.

The Minister of Agriculture, Fisheries and Food (Mr. Michael Jopling): The Agriculture Council earlier this week was again unable to reach agreement on cereal prices. The Commission, however, stated that for the coming marketing year it would apply prices for cereals based on an abatement of 1·8 per cent. It also stated that it would be authorising member states to make an end of season payment for common wheat and rye of breadmaking quality and putting proposals to the management committee to reduce the delay in the payment period for cereals bought into intervention and to operate a special intervention measure for breadmaking wheat towards the end of the 1985–86 marketing year.
The Council will return to the question of cereal prices at future meetings and, in addition, the Commission has said that it intends to bring forward proposals in the autumn for modifying the cereals regime so that decisions on the future of the regime may be taken by the end of 1985.

Mr. Latham: What sort of Fred Karno outfit is it when the non-elected bureaucrats arbitrarily fix cereal prices because the elected Ministers cannot agree? Surely our farmers and consumers deserve a better arrangement.

Mr. Jopling: I agree that this is an uncertain area. The Commission claims that the Council's failure to take decisions is contrary to its obligations under the treaty and that the Commission has a duty to fill the gap as far as possible. The Government do not think that it would be profitable to add to the uncertainty. The price reduction of 1·8 per cent. will therefore be applied in the United Kingdom, pending a final decision by the Council.

Mr. Heathcoat-Amory: As technology and improved techniques will continue to boost cereal production throughout Europe, is it not vital to have an enforceable and realistic policy of controlling surpluses? As the 1·8 per cent. price cut will not do the trick, and as my right hon. Friend must have a realistic policy, can he tell us what it is?

Mr. Jopling: My hon. Friend has heard me say time and again that discipline by price is the best way in which to control surpluses. The combined result of the Commission's decisions is that the support price for 1 tonne of wheat will fall by an estimated 7 per cent. in real terms in 1985–86. That follows a reduction of more than 9 per cent. in real terms during the previous three seasons.

Mr. J. Enoch Powell: Is the Minister satisfied about the legality and propriety of the method by which the 1·8 per cent. abatement is being made?

Mr. Jopling: As the right hon. Gentleman knows, there is a precedent for the Commission moving in, in

circumstances such as these, when there is a legal vacuum. The Government do not think that it would be profitable to add to the uncertainty.

Mr. Torney: Is the Minister aware that this country has a surplus of 4 million tonnes of grain and 3 million tonnes of wheat used mainly for animal feed, which is not required? Is he further aware that putting goods into intervention costs the British taxpayer £40 million a year? What is he going to do about that appalling situation?

Mr. Jopling: I would have hoped that the hon. Gentleman would applaud the efforts that I have been making to apply even stronger cereal price cuts. I should have thought that he would agree with me that it was a significant step forward over the past three years to have had a reduction of 9 per cent. in real terms. The Commission's decision for this year implies a reduction of a further 7 per cent. in real terms.

Mr. Deakins: As an important principle is at stake here—whether the Commission has the power to overrule and override the veto of a member Government—will the Minister confer with his colleagues about the possibility of having the matter referred to the European Court of Justice for a ruling?

Mr. Jopling: It is not the Government's intention at the moment to refer this matter to the court. Under the guarantee threshold arrangement. this year there should have been a reduction of 5 per cent. There is, therefore, a strong argument for saying that there should be a reduction in cereal prices this year, although I wish that the reduction was more than 1·8 per cent.

Mr. Parris: Does my right hon. Friend agree that the failure to reach a decision, however looked at, is disastrous for the Community? Can he explain what will happen about storage, given that there is already a record amount of grain in intervention store in this country and that a record amount of cereals has been planted and is about to be harvested? What will happen to the new crop?

Mr. Jopling: My hon. Friend is a brave man to assert that there will be a record harvest. That is not a certainty. I hope that he will reflect on the fact that over the years there has been a major change in the attitude of the Council of Ministers and the Commission, and that although three years ago we were talking about a double digit increase in cereal prices, this year there will be a fall of 7 per cent. in the price of this season's wheat in real terms.

Mr. John: Does not the fact that Ministers were talking about a two-figure price increase so recently mean that the position is desperate? Will he confirm that the Commission's report reckons that the profit margin on cereals throughout the Community is between 20 and 30 per cent. and that this year's end of season stocks will be 10 million tonnes higher than last year? What hope do we have that in the autumn, or at any other time, the Commission will be less feeble and Ministers less faint-hearted than they have shown themselves to be this summer?

Mr. Jopling: I hope that the hon. Gentleman will give me credit for having been the most robust Minister in arguing in the Council of Ministers for reduced prices. I was the only member of the Council of Ministers who argued consistently that cereal prices should be reduced by the full 5 per cent. that was implicit in the guarantee threshold. I shall continue to argue in that way.

Sea Fisheries Committees

Mr. Patrick Nicholls: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the operation of Sea Fisheries Committees byelaws.

Mrs. Fenner: Sea fisheries committees, through the application of byelaws, can make a valuable contribution to fisheries conservation at local level. We are satisfied with the operation of those byelaws, but we recognise that the procedures governing their confirmation, set out in a statutory instrument dating from 1938, need to be brought up to date. A revision is now under discussion with the SFCs.

Mr. Nicholls: Will that revision take into account the circumstances in which scallop fishermen in my constituency can find themselves, namely, that their licences have been revoked by the Southern sea fisheries committee and that the advertisements giving notice of that intention are put into newspapers which the committee knows do not circulate in the area in which those fishermen live? Does that not amount to a substantial injustice? Will the Minister consider using her powers to revoke that byelaw, because an injustice has resulted?

Mrs. Fenner: I appreciate the difficulty with the present statutory advertising procedures for fishermen outside the district covered by that sea fisheries committee. Those advertisements were placed in seven local newspapers, and the committee met the statutory requirement. However, I do not accept that the restrictions imposed to safeguard scallop fisheries in the southern district were unjust. We are considering whether it would he advantageous to require SFCs to advertise in the trade press, which is widely read in the industry.

Dr. Godman: To what extent is the north-east England drift net fishery shaped by sea fisheries committee byelaws? The Minister must know that there is a growing demand in Scotland for that fishery to be outlawed. Will she ensure that the interests of those fishermen are not harmed by any changes in the law?

Mrs. Fenner: We are considering the net fisheries in the north-east area, and future arrangements for it are under review. We hope to announce our conclusions soon. A later question on the Order Paper may also relate to that matter.

Mr. Beith: Does the Minister recognise that the Northumberland sea fisheries committee is an extremely experienced body in the operation of its byelaws? Will she take good account of its advice on the matter raised by the hon. Member for Greenock and Port Glasgow (Dr. Godman), and on the Scottish Office's proposed regulations on the carrying of monofilament nets by boats? Will she ensure that the advice of the Northumberland sea fisheries committee is taken fully into account?

Mrs. Fenner: We always listen to the wise advice of the sea fisheries committees.

Mr. Soames: Does my hon. Friend agree that the sea fisheries committees could take a notable lead by banning the use of monofilament nets, as has already happened in Scotland? Why will the Ministry not do the same for England and Wales?

Mrs. Fenner: We have no evidence that monofilament nets cause any more damage to fish escaping than do mutlifilament nets. We have no intention of introducing a general ban.

Mr. Campbell-Savours: Where sea water netsmen for salt water species find that their interests come into direct conflict with those of anglers on rivers, how does the. Minister propose to resolve that dilemma? Is she aware that in west Cumbria it is almost impossible for sea netsmen to lay their fixed engine nets and that the law no longer favours them, although it should favour both sides?

Mrs. Fenner: The Ministry can review all such fisheries. As I said earlier, we are examining the north-east net fisheries for that very reason.

Mr. Mark Hughes: Will the Minister think again about monofilament nets? All the evidence shows that they are a disgrace and should be banned throughout our inshore fishing areas. Does she accept that the Opposition would welcome an urgent revision of all sea fisheries committee byelaws and the necessary statutory instrument to bring that about?

Mrs. Fenner: I assure the hon. Gentleman that the Ministry's directorate of fisheries research keeps the effect of those nets under constant review.

Food Manufacture (Transport Costs)

Mr. Thurnham: asked the Minister of Agriculture, Fisheries and Food if he will provide figures for 1984 for the percentage cost of the transport element of food manufacture costs in the United Kingdom and the European Economic Community.

Mrs. Fenner: On average, transport costs probably represent about 5 per cent. of food manufacturers' costs in the United Kingdom, but there will inevitably be considerable differences between manufacturers. I am not aware of the position being markedly different in the European Community as a whole.

Mr. Thurnham: I thank my hon. Friend for her answer. Is she aware that the CBI has said that transport costs in Britain are twice as high as those in the rest of the EC? Will she consider those differences further?

Mrs. Fenner: The evidence that I have described does not show that to be the case, but any evidence that United Kingdom manufacturers are being disadvantaged because of transport costs should be passed to my right hon. Friend the Secretary of State for Transport.

Mr. John: Does not the huge concentration of food processing plants in the south-east of England involve a double journey of food from the growing areas to the processing plants and back again to be sold? Should we not encourage food processing plants to be dispersed throughout the regions, thus avoiding such extra expense?

Mrs. Fenner: There has been some reallocation of food processing plants through the regional programme. The Centre for Physical Distribution Management, in a survey of distribution costs in the United Kingdom last year, found that transport costs of food, drink and tobacco manufacturers were on an average 5·77 per cent. of sales. The figure varied tremendously between firms, from 0·35 per cent. to 9·97 per cent.

Aujeszky's Disease

Mr. Freud: asked the Minister of Agriculture, Fisheries and Food how much has been paid in compensation to pig farmers for losses incurred because of Aujeszky's disease in each of the last three years; what is the aggregate loss to farmers; and whether he will make a statement.

Mr. Jopling: About £25·3 million has been paid to owners in compensation for slaughter of pigs affected with the disease—£21·5 million was paid in 1983, £3·4 million in 1984 and £350,000 so far this year. In addition, I understand that Pig Disease Eradication Fund Ltd. paid about £3·7 million for disruption costs. It is not possible to give a total figure for farmers' losses in the campaign.

Mr. Freud: I thank the Minister for that reply. Will he show some sympathy to the industry, which tried to follow his philosophy of helping itself, only to find that the costs were vastly in excess of the estimates? Is it right for the Government to escape completely from the consequences of what the Standing Committee called at least a failure of communications, and at worst maladministration?

Mr. Jopling: The hon. Gentleman will recall that this scheme was started at the express wish of the industry, and it was on the absolute understanding that it was to be producer-financed. As the hon. Gentleman has been honest enough to acknowledge, the figure of £6 million was an estimate. I remind him that my Department has already contributed more than £3 million in veterinary and administrative resources and in laboratory testing. I remind him as well that the Select Committee, in paragraph 23 of its report, said:
it does not appear that MAFF has any contractual obligations to bail out the industry".

Mr. Maxwell-Hyslop: Is my right hon. Friend aware that although no Standing Committee has reported on this matter, contrary to what the hon. Member for Cambridgeshire, North-East (Mr. Freud) has said, the Select Committee on Agriculture has done so? Does my right hon. Friend accept the obligation which the House knows falls upon him and the recommendations of that Select Committee report? Does he not have a statutory duty to take an effective interest in the prevention of animal disease in this country for the benefit of the nation as a whole, not just of agricultural producers? If my right hon. Friend the Secretary of State for Scotland can get £50 million a year to reduce the rates burden, cannot my right hon. Friend the Minister for Agriculture, Fisheries and Food get a few more million pounds to help to put the eradication fund back into solvency?

Mr. Jopling: The Select Committee report makes it clear that
it does not appear that MAFF has any contractual obligations to bail out the industry".
Estimates were made, and it was made clear that one could not be precise about how much this disease would cost. I am bound to draw to the attention of my hon. Friend, although he may know it already, that the fund's overdraft of £14 million has been made a good deal higher because of the just short of £4 million of extra costs represented by consequential losses, which were paid out by the fund against my Department's advice. I do not believe that, in spite of the Select Committee's report, there is a duty on my Department to bail out in this case.

Mr. Haynes: Is the Minister aware that I get the distinct impression that he is standing at the Dispatch Box bragging about how much the Government are paying in compensation? What sort of effort are the Government, especially the Minister, making to stamp out the disease? That is what my farmers want to know. Let us hear about it.

Mr. Jopling: I am delighted to hear of the hon. Gentleman's great interest in the matter. Since the scheme began in March 1983, 500 herds, including 420,000 pigs, have been slaughtered. Since June 1984, only 17 cases have been confirmed, compared with 92 in May 1983 at the height of the campaign. There are likely to be a few remaining foci of infection, and the efforts of the state veterinary services are geared to identifying those few remaining cases.

Mr. Key: Does my right hon. Friend agree that pig farmers are not financial experts, that the sum is modest compared with the rest of the agriculture budget, and that he is setting a dangerous precedent if he says that the Government will not be responsible for parts of the agricultural sector, if farmers have agreed otherwise, even if there is a risk of disease? One can, in particular, foresee antibiotic problems in fish farming.

Mr. Jopling: In this case we had a scheme to deal with a disease, on which the industry placed high priority. The scheme was embarked upon at the specific request of the industry, on the absolute understanding that it was to be producer-financed and that Government money would not be involved. In spite of that, my Department has spent more than £3 million monitoring the programme. That is an extremely generous sum.

Mr. Mark Hughes: Does the Minister accept that to hide behind the absence of a contractural obligation is unacceptable to the farmers, that animal health is his responsibility, and that ultimately he must pay for the good health of our pig population?

Mr. Jopling: I do not accept that. The industry said that it wanted to operate the scheme and would finance it. We said that the cost would be at least £6 million, and it has cost more than that. We made it clear that estimating how much it would cost was an unpredictable science. We should not pay any more towards the scheme on top of the £3 million.

Confectionery Exports

Mr. Gregory: asked the Minister of Agriculture, Fisheries and Food what value are the United Kingdom's exports of confectionery for the last year for which figures are available.

Mrs. Fenner: Overseas trade statistics for 1984 provisionally value exports of sugar confectionery, not containing cocoa, and chocolate confectionery at £239,039,000.

Mr. Gregory: In view of the importance of that key sector of the economy, will my hon. Friend, who represents the sponsoring Ministry, hold discussions with the representatives of overseas states which seek to restrict the import of confectionery? They are fixing artificial barriers to a leading food export product, and the sooner they understand that those artificial barriers are not in the interest of world trade, the better.

Mrs. Fenner: We are well aware of the industries involved. My hon. Friend discussed the matter with the Cocoa Chocolate and Confectionery Alliance at a meeting on 26 June, and it was the subject of an Adjournment debate on 24 May. We made it clear that we would continue to take every opportunity to dissuade United States authorities from imposing restrictions. Meanwhile, we remain in close touch with the United Kingdom trade and the Commission.

Mr. Hardy: Does the Minister accept that the British confectionary industry is excellent and should be enjoying a greater share of the export trade? Will the Government ensure that both the United States of America and our Common Market partners are not allowed to erect artificial barriers, so enabling the industry to maintain and achieve the markets that it deserves?

Mrs. Fenner: I hope I made it clear that we shall argue the case strongly and in every forum that we can. The Government are committed to promoting exports and assisting exporters.

Mr. Greenway: What is the value of our imports of confectionery? In view of the high standard of our industry, why do we need imports?

Mrs. Fenner: I cannot find the figure for the value of imports. I can tell my hon. Friend only that the value of our exports is £40 million to the United States alone.

Mr. Meadowcroft: Is not one of the constraints imposed by other countries the requirement for much more detailed listing of the sugar content of confectionery? Is that not a perfectly proper thing to do, which we would value in this country, so that people may choose what they eat?

Mrs. Fenner: We are not convinced that that is a perfectly proper thing to do. That is the case that we are making.

Common Agricultural Policy

Mr. Marlow: asked the Minister of Agriculture, Fisheries and Food if he will estimate the cost of levies and duties to the average family of four due to the common agricultural policy arising from the difference between farmgate prices and cif to the United Kingdom port prices plus port charges, but excluding all European Economic Community tariffs and duties, for major traded agricultural commodities.

Mrs. Fenner: In 1984 the United Kingdom collected some £387 million of levies and duties on imports of agricultural products from countries outside the European Community, equivalent on average to about 53p per week for a family of four.

Mr. Marlow: As my hon. Friend knows, agricultural support before we joined the Community was paid through taxation. Now agricultural support is paid through the common agricultural policy and through the infinitely higher price that Community produce sustains compared with world market prices. Effectively, that is a food tax on the consumer. I am sure that my hon. Friend would like eveybody to know what the factors are in the argument. Will she develop that theme so that we may know from week to week and month to month what food tax consumers in this country are paying?

Mrs. Fenner: Any question that my hon. Friend wants to table about the effects of levies similar to the one that I have just answered will, of course, be answered. However, I know my hon. Friend's views on Europe. Security of supply in Europe is valuable, too, although we are confronted with some surplus now, and there are other very good reasons for our membership of the Community.

Milk Quotas

Mr. Colin Shepherd: asked the Minister of Agriculture, Fisheries and Food if he will issue advice to dairy farmers with milk quotas who wish to acquire further quota by means of leasing or purchase.

Mr. Jopling: I am actively pursuing in Brussels changes to the Community regulations to allow quota to be transferred separately from land. There is resistance, however, and I cannot predict the outcome of our negotiations at this stage.

Mr. Shepherd: I am grateful to my right hon. Friend for that reply. Does he agree that one of the fundamental planks of the solution to the problem is knowing how long the quotas will stay, or whether quotas will be taken off or revised? Will my right hon. Friend press that point so that the industry is given the underlying confidence to enable it to plan?

Mr. Jopling: As my hon. Friend knows, quotas were introduced for a period of five years, with a review at the end of three years. I was interested to see recently that the National Farmers Union issued a press statement saying that it hopes that quotas will remain. I understand that it would be an important matter if there were a free sale of quotas separately from land, but I do not believe that we shall be able to move towards taking a view one way or the other at least until the review at the end of the third year.

Mr. Geraint Howells: I am sure that the Minister is well aware that many dairy farmers in Britain are in dire financial trouble because of the Government's policy. He is well aware that he introduced a policy that was unacceptable to the people. Does he accept that many dairy farmers are trying to advise the Government to introduce a scheme to look after the interests of those who were severly hit in 1983–84?

Mr. Jopling: I congratulate the hon. Member on what appears to be his reappointment as agricultural spokesman for the Liberal party. I note what he said about milk quotas. Travelling around the country as he does, I am sure he has discovered that farmers are becoming increasingly accustomed to working with milk quotas and seem to be attaching some importance to their continuance.

Mr. Nicholas Winterton: Will my right hon. Friend accept that the acquisition by lease or straightforward purchase of an additional quota by dairy farmers is the only way that some of them will be able to remain in business and avoid having to sell some of their land or perhaps the whole farm? Will he give some guidance on, and inject some urgency into, the problem along the lines of the question asked originally by my hon. Friend the Member for Hereford (Mr. Shepherd)?

Mr. Jopling: My hon. Friend takes a close interest in these matters. He will know that I have said repeatedly that I should like to move as soon as possible to the leasing and


sale of quotas. That will be done when we can get more support from other member states and from the Commission. At the moment, it would mean major changes in both Community and domestic legislation, and the Community and some member states are strongly resisting a sale and purchase scheme. It therefore follows that changes will be difficult to achieve, and I cannot predict the outcome of negotiations. I am pressing as hard as I can to get a leasing of quotas to meet the problem to which my hon. Friend has drawn our attention.

Mr. Nicholson: Will the Minister give serious consideration to the plight of the young dairy farmer who is in a position neither to purchase nor to lease a quota? Will he consider giving such people a start on the bottom of the ladder so that they may have a future? Without young dairy farmers coming in, the industry will eventually die.

Mr. Jopling: The hon. Gentleman will have heard me say many times that because of the problems of the young man starting in the dairy industry it is important to get more flexibility into the system. I have said that from the beginning, and I shall continue to do what I can to secure that flexibility.

Sir Hector Monro: Does my right hon. Friend agree that it would be most helpful if we could get a united front in this country? Does he think that it would be a good idea to bring together the Country Landowners Association and the NFU so that they can reach a common decision? Does he further agree that the Liberal spokesman is probably away discussing the rating of agricultural land?

Mr. Jopling: Events are moving so fast that I am not sure who is to be the Liberal spokesman on agriculture.
We are doing what we can to get a united view among all interested parties about how quotas could be made more flexible.

Mr. John: We cannot be sure who many of the party spokesmen will be in the autumn.
Does the right hon. Gentleman agree that one of the problems with quotas is that in the Community more milk is being produced than is being consumed? Will he bear in mind that that is an urgent problem which meeds to be faced by the Council of Ministers? If it is not dealt with, we shall have another panic measure in a few years' time.

Mr. Jopling: The hon. Gentleman has put his finger on a most important point. Many people tend to forget that this year we shall produce about 98 million tonnes of milk and consumption will be about 85 million tonnes. That is why the Commission is currently examining the possibility of another buy-out scheme financed either wholly or partly by the Community, in order to cancel that quota and reduce the 13 million tonnes surplus.

Beef Industry

Sir John Farr: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the level of returns in the beef fattening industry.

Mr. Jopling: In the first half of 1985 producer returns, taken as market price plus variable premium for finished beef cattle, were slightly lower than in the corresponding period of 1984. This reduction was, however, partly offset by lower prices of compound feedingstuffs.

Sir John Farr: I congratulate my right hon. Friend on his efforts to retain the beef premium scheme, which has made so much difference to the industry, but does he agree that the business of beef fattening and finishing has now become so unprofitable that there is a real risk of the English beef joint disappearing from the Sunday dinner table?

Mr. Jopling: I am grateful for what my hon. Friend said about the variable premium payments, which are worth between £2 million and £3 million a week to the industry. Intervention has played a greater role since the introduction of the carcase classification grid last year. The United Kingdom intake is now running at about 1,000 tonnes of forequarters per week. The suckler cow subsidy was doubled to £24·74 per cow last year. This year, the hill livestock compensatory allowances have become available in marginal areas for the first time. In addition, private storage aid was made available earlier this year.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. O'Brien: asked the Prime Minister if she will list her official engagements for Thursday 18 July.

The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today.

Mr. O'Brien: Is the Prime Minister aware of the hardship and suffering that her Government are causing all people, but patients especially, because of the restricted drug list in the National Health Service? Is she aware also that old people now have to pay between £7 and £10 a week to obtain the drugs that they require, for which there are no alternatives? Will she shake up the Department of Health and Social Security, which admitted in a letter dated 17 June that it had not the resources to reply to the letters of complaint that it was receiving, to make sure that hon. Members can obtain information about what is likely to happen in the future? Will she take steps to make sure that the Department is overhauled and that the restructured list is extended?

The Prime Minister: I do not accept what the hon. Gentleman said about the prescribed drug list. Every penny that is saved by prescribing generic drugs instead of specific named drugs goes back into patient care and therefore enables more medical services to be supplied. I should have expected the hon. Gentleman to be grateful for that. I shall look into his complaint about the Department's failure to reply to letters.

Mr. Neil Thorne: Will my right hon. Friend find time today to condemn all racial harassment? Will she condemn especially those who jump to conclusions about these issues in advance of police investigations, especially in the Kassam case in my constituency?

The Prime Minister: I gladly join my hon. Friend in condemning unreservedly all racial harassment. It should not occur in a country such as ours. If it does, it must be dealt with. I agree with my hon. Friend that the specific case to which he refers is a matter for investigation and that it is not for us to jump to conclusions.

Mr. Hattersley: Since the Department of Health and Social Security now concedes that it possesses figures for both gainers and losers under the Government's new social security plans, why did the Prime Minister pretend that no such figures existed?

The Prime Minister: I have made it perfectly clear in the House that illustrative figures will be published at the right time when decisions have been taken on the White Paper and that no effective figures could be published until then.

Mr. Hattersley: If the figures had only this minimal importance, why was the paper which included them withdrawn from civil servants for destruction, on instructions from the Department, immediately after the Prime Minister made her dubious statement to the House a month ago?

The Prime Minister: I have made it very clear that the time to publish a range of figures is when decisions have been taken on the structure at the time of the publication of the White Paper. Other figures would be purely speculative. I note that the right hon. Gentleman has nothing more significant to ask.

Mr. Hattersley: The Prime Minister must know that she is wholly unconvincing when she tells us that the Department of Health and Social Security called in a paper and had it shredded for figures that were wholly speculative. Is it not more likely to be the case that she wanted to suppress the figures because they demonstrate that under her proposals 1·8 million families will lose housing benefit altogether, and 600,000 families will be denied supplementary benefit?

The Prime Minister: The right hon. Gentleman will recall that, when the Leader of the Opposition was asked about his figures, he said:
I am not going to put figures on two or three years hence.
If we wished to conceal figures, we would hardly have undertaken to give an illustrative range of figures in the White Paper this autumn. We could hardly have wanted to be concealed that which we intend to reveal when the time is appropriate.

Mr. Michael Brown: asked the Prime Minister if she will list her official engagements for Thursday 18 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Michael Brown: With over 40 per cent. of tax revenues coming from those on below average income, does my right hon. Friend agree that, if we are to help the low paid, tax cuts must be the priority in her deliberations with her Cabinet colleagues?

The Prime Minister: Yes, I accept that tax cuts are a priority. As my hon. Friend is aware, we have done a great deal to increase the tax-free allowances. We have put up the tax-free allowances in our time by 20 per cent. in real terms. There is more to be done because, as my hon. Friend is aware, some 40 per cent. of pensioners come into the range of income tax and, as he has already said, many people below average earnings pay far too much income tax.

Mr. Steel: Will the Prime Minister deny the reports that were circulating last week that, instead of attending the world conference of Finance Ministers with the IMF

and the World Bank in October, the Chancellor of the Exchequer will be attending the Conservative party conference at Blackpool? Does she agree that it is time for British leadership on issues such as interest rates, currency stability, the fight against recession, Third world development, and debt, and will she tell her right hon. Friend that he really ought to go to the world conference?

The Prime Minister: I am surprised that the right hon. Gentleman thinks it surprising that the Chancellor should think it important to be at a party conference. I wonder whether the right hon. Gentleman would not put off certain engagements to be at his own party conference.

Mr. Parris: With so many more newsworthy issues facing my right hon. Friend, will she not forget the problems that face agriculture as we go into the summer still with no agreement on cereals, and with a regime on dairy products which faces with ruin many small dairy farmers in hill and marginal land?

The Prime Minister: I am indeed aware that many small farmers have been placed in difficulty. As my hon. Friend is aware, we had to take action on the common agricultural policy, but it does not make sense to pour more and more money into surpluses. Therefore, we are taking action steadily to bring down the surpluses. I think that that is correct.

Mr. Wareing: asked the Prime Minister if she will list her official engagements for Thursday 18 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Wareing: Would the right hon. Lady care to define to the House and to the 11,000 people who had their homes repossessed last year because they could not pay their mortgages, 40 per cent. of whom went into arrears because of unemployment, the term "property-owning democracy"?

The Prime Minister: A record number—over 60 per cent.—of all people in houses own their own homes. That is excellent, and is in no way counteracted by the fact that a very small percentage have had their homes repossessed. The number of people having difficulties in meeting their mortgage payments is still well under 1 per cent. of the total.

Mr. Michael Forsyth: asked the Prime Minister if she will list her official engagements for Thursday 18 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Forsyth: In view of my right hon. Friend's reply to my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) recognising the vital importance of tax cuts in generating economic growth and job creation, will she consider introducing an accelerated programme of disposal of state assets in order to support significant cuts in tax rates over a number of years? Will she recognise that that would have the added benefit of restoring much more of the economy to the disciplines of the competitive private sector?

The Prime Minister: Yes. It is important to go ahead with the privatisation programme for its own sake. It improves the performance of former nationalised industries, it enables many people working in those


industries to come into share ownership for the first time and it enables managers to manage on a commercial basis. All those are good things in themselves and they help to reduce taxation.

Mr. Torney: Will the Prime Minister give further consideration during her busy day to her decision to abolish wages councils for workers aged under 21? I represent the Union of Shop, Distributive and Allied Workers, which has a mass of members who come under the wages councils. Will the Prime Minister realise, as those people do, that her Government, having created mass unemployment, are using it to cut the standard of living of thousands of young workers throughout the country, including members of my union who know that their conditions will be worsened by the Government's action? Will the Prime Minister reconsider her decision and not abolish the wages councils?

The Prime Minister: No. The decision announced by my right hon. Friend the Secretary of State for Employment yesterday will, I believe, improve the employment prospects of young people and will be a further step towards relieving the burden of regulations on small businesses. I remind the hon. Gentleman that 16 wages councils have been abolished since 1969, and 14 were abolished by Labour Governments.

Mr. Jim Spicer: asked the Prime Minister if she will list her official engagements for Thursday 18 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Spicer: My right hon. Friend will be aware that the major problems in famine areas are the provision of transport and lack of infrastructure. Will she take advantage of next week's meeting in Washington of party leaders of the International Democrat Union to press for better co-operation in those areas, if necessary, by the secondment of NATO military personnel to the United Nations?

The Prime Minister: I am reluctant to try to do that centrally through the United Nations, as I do not think that it would be the best way. There is a United Nations relief co-ordinator in the stricken areas, including Ethiopia. We co-operate through him and he asks for bilateral military aid where it is required. As my hon. Friend knows, we have been giving considerable help in Ethiopia through the

Hercules and by other means. I think that that bilateral action, through the United Nations local special coordinator, is the best way to continue.

Mr. Hume: In the light of the Prime Minister's statement to the American Bar Association earlier this week that no ransom would be paid for kidnapped people in this country, will she tell me why the Government have never taken action against insurance companies in the City of London which conduct a multi-million pound business providing insurance cover against ransoms after kidnaps? Does she agree that the existence of such policies is an encouragement to kidnapping, as is proved by the fact that everybody kidnapped in Britain and Ireland by terrorists over the past number of years held such policies?

The Prime Minister: I tend to agree with the hon. Gentleman that the existence of such policies is conducive to kidnapping and can encourage the kidnapper in his terrible work.

Sir Fergus Montgomery: asked the Prime Minister if she will list her official engagements for Thursday 18 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Sir Fergus Montgomery: Has my right hon. Friend noticed that a CBI report forecasts that 370,000 new jobs will be created in 1985? Does she agree that if that is realised 1 million new jobs will have been created since the last election? Is that not something to give hope to the unemployed?

The Prime Minister: The CBI report certainly gives hope. I hope that young people will be encouraged by the fact that 640,000 new jobs have been created in the last two years. As the news from Eurostat shows, more new jobs have been created in Britain in the last year than in the whole of the rest of the European Community.

Mr. Willie W. Hamilton: Now that the House is about to go into recess, will the Prime Minister give a message of comfort to the nation and the House that she will not undertake any official visits during the recess?

The Prime Minister: Many people who have made important invitations would take considerable discomfort from such a reply.

Business of the House

Mr. Roy Hattersley: May ask the Leader of the House to state the business for next week?

The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): Yes, Sir. The business until the Adjournment will be as follows:
MONDAY 22 JULY—Consideration of Lords amendments to the Social Security Bill, the Interception of Communications Bill and the Sporting Events (Control of Alcohol, Etc.) Bill.
Remaining stages of the Bankruptcy (Scotland) Bill [Lords].
Motion on the House of Commons Disqualification Act 1975.
Motion on European Community Document No. 9427/79 draft directive on the approximation of the laws, regulations and administrative provisions of all member states concerning liability for defective products.
The Chairman of Ways and Means has named opposed private business for consideration at seven o'clock.
TUESDAY 23 JULY—A debate on a Government motion to approve the statement of changes in immigration rules laid on 15 July (House of Commons Paper No. 503).
Motion relating to the statement of changes in immigration rules, Cmnd. 9539.
Remaining stages of the Child Abduction and Custody Bill [Lords]
WEDNESDAY 24 JULY—Motion for the summer Adjournment. It will be proposed that the House should adjourn until Monday 21 October.
Proceedings on the Consolidated Fund (Appropriation) Bill.
THURSDAY 25 JULY—Motions on orders and regulations relating to the uprating of social security benefits and other related matters.
Motion relating to the Housing Benefit (Miscellaneous Amendments) Regulations. Details of relevant documents will appear in the Official Report.
FRIDAY 26 JULY—Debates on the motion for the Adjournment.

European Community documents to be debated;

Monday 22 July

Relevant documents


9427/79
Liability for Defective Products Explanatory Memorandum by the Department of Trade and Industry dated 1 July 1985

Relevant Reports of European Legislation Committee
HC 159-xxii (1979–80) paragraph 1; and
HC 5-xxvi (1984–85) paragraph 1

Thursday 25 July

Relevant documents

Report by the Government Actuary on the draft of the Social Security Benefits Uprating Order 1985, Cmnd. 9567.


Uprating of mobility allowance
Statement prepared pursuant to section 37A(4) of the Social security Act 1975 as amended by Section 3(2) of the Social Security Act 1979

(House of Commons Paper No. 491)

Mr. Hattersley: May I ask the Leader of the House two specific questions? In the light of today's publication of the report by the Select Committee on Defence about the future of the royal dockyards which unanimously condemns the Ministry of Defence's approach to privatisation and the Ministry's failure properly to consult, may we be categorically promised an early debate and chat no action will be taken until the debate is held? Secondly, after the Sporting Events (Control of Alcohol, Etc.) Bill is passed—I hope that it will be and that my hon. Friends will ensure that it is—are we to hear no more about violence and safety at football grounds? Is it a fact that after the Prime Minister made the headlines in Downing street two months ago we are to be left simply with that wholly inadequate measure?

Mr. Biffen: Public order legislation has been promised for the next Session of Parliament and doubtless will feature prominently in our discussions then. We shall consider the right hon. Gentleman's first point through the usual channels.

Sir Anthony Grant: Has my right hon. Friend seen early-day motion 895?
[That this House believes that, in the interest of obtaining better value for money, local authorities should be required by law to submit to competitive tender a wider range of their functions and services.]
It stands in my name and those of no fewer than 191 of my colleagues. It seeks to compel feeble local authorities, in the interest of ratepayers, to submit their contracts to competitive tender. Although I accept that there may not be time to debate this matter before the House rises for the recess, can my right hon. Friend assure us that the Government have not lost their nerve on this issue, even if some local authorities have?

Mr. Biffen: My hon. Friend is a touch pessimistic in the sense that there are a number of opportunities during the week ahead when that matter might be debated. I shall certainly draw the attention of my right hon. Friend the Secretary of State for the Environment to that point.

Mr. A. J. Beith: Will the Secretary of State for Education and Science make a statement next week on the Prime Minister's proposal to reintroduce direct grant schools and student loans, or does the Secretary of State need more notice of these proposals, in which case he might prefer to make the statement after the recess? Why will the debate on Tuesday on the immigration changes be taken on a Government motion rather than on a prayer tabled by my colleagues? Are the Government so desperate to get their word in first?

Mr. Biffen: It is a sign of the seriousness that the Government attach to this matter that the subject will be debated on a Government motion. I am surprised that the hon. Gentleman finds anything extraordinary in that.
Of course I shall draw the attention of my right hon. Friend the Secretary of State for Education and Science to the hon. Gentleman's first point. I am sure that he will not have overlooked the fact that Tuesday is Question Time on education matters.

Sir Kenneth Lewis: Is my right hon. Friend aware that many Conservative Members support what my right hon. Friend the Prime Minister said about direct grant schools? It is extraordinary that the hon.


Member for Berwick-upon-Tweed (Mr. Beith) had the nerve to raise that matter since it was the president of the SDP, when she was in the Labour party, who did away with those schools. If we cannot bring back direct grant schools, will the Cabinet realistically discuss some means of increasing the number of free places that are available in public schools and make all public schools give some free places to children who do not have the chances that I had as a boy when I went to grammar school?

Mr. Biffen: My hon. Friend has clearly shown that Parliament will have a lively debate on this topic, and dare I suggest that it might start on Tuesday.

Mr. James Molyneaux: Can the Leader of the House confirm that, following consultations through the usual channels, the Nursing Homes and Nursing Agencies (Northern Ireland) Order will not be moved tomorrow so that further discussions can take place?

Mr. Biffen: That is perfectly true. I am grateful for the representations that were made last week which gave rise to that change.

Mr. Ivan Lawrence: Is my right hon. Friend aware that I am grateful that the Water (Fluoridation) Bill was not included in the Government's timetable while I was in Moscow with the Select Committee on Foreign Affairs? This shows that the Government are open to further argument on the matter. Is the reason why that legislation is not included in next week's business the fact that the Government may be having second thoughts because Mrs. McColl has been granted full legal aid to go to the European Court of Human Rights and that the Government wisely consider that it is better to hear the results of the court's findings before jumping too quickly into legislation?

Mr. Biffen: While my hon. and learned Friend was getting a preliminary sense of Siberia, a number of Conservative Members made the most powerful representations to the Government to ensure that the legislation reached the statute book.

Mr. James Hamilton: Is the Leader of the House aware that all Scottish Back Benchers, with one exception, are very much concerned about the corporate plan for steel? Will he give the House a categorical assurance that no decision will be taken on the corporate plan until the House resumes after the summer recess? Will he assure us also that there will be no inspired leaks and that hon. Members will have all the rights in the world to discuss the corporate plan?

Mr. Biffen: I understand the hon. Gentleman's point and the importance of the decisions for Scotland that will be implied in the corporate plan. I shall ensure that his views are conveyed to my right hon. Friend the Secretary of State for Trade and Industry.

Sir Dudley Smith: In view of the anxieties that are being expressed by the Confederation of British Industry and other representative elements of industry about product liability and the directive which will probably be issued from Brussels in the near future, does not my right hon. Friend think that it is time that we had a debate about this matter because of its very wide ramifications?

Mr. Biffen: I wholly sympathise with my hon. Friend if he nodded during the litany that I announced for Monday's business, which includes precisely the debate that he seeks.

Mr. Dave Nellist: Given the generosity of young people, particularly last weekend at Wembley and in Philadelphia, is it not time that the Leader of the House arranged a debate to illuminate the hypocrisy of his Government, and in particular the hypocrisy of the Prime Minister who on Monday and Tuesday attempted to bask in the reflected glory of the actions of young people over the weekend and then on Wednesday turned on those same young people and removed those under the age of 21 from the protection of wages councils, as if lads and lasses in hairdressers earning £33·40 a week were responsible for the 5 million unemployed in this country?

Mr. Biffen: I always enjoy the contributions of the hon. Gentleman. They are a lively reminder that consensus, thank Heaven, will never reign here. The points that he has mentioned could well be raised either on the motion for the summer Adjournment, or on the Consolidated Fund Bill, or on the Adjournment debates. I wish him well in raising that point on any of those occasions.

Mr. Michael Latham: In preparing his speech for the Adjournment debate next Wednesday, will my right hon. Friend be asking the Departments concerned, particularly the Treasury, for all the reasons why between now and Wednesday there should be a further fall in interest rates?

Mr. Biffen: The last time I had to make this speech I took the precaution of not accepting briefs from any Government Department, and nobody noticed the difference.

Mr. Jeff Rooker: Will the Leader of the House seek to add to next Thursday's business on the uprating of social security benefits the latest report of the Public Accounts Committee on the system of paying benefits so that this House can reject early enough, to stop people from worrying, the idea that millions of pensioners should be bribed to stop using post offices to collect their pensions?

Mr. Biffen: It is not within my competence to judge whether it would be in order to make those points in next Thursday's debate, but the hon. Gentleman is probably skilled enough to try—and to try with success.

Mr. Nicholas Soames: While my right hon. Friend is casting around during the summer recess for matters to debate upon our return, will he consider providing Government time for a debate on small businesses and upon the many excellent moves that the Government have made to encourage them?

Mr. Biffen: I shall bear that request very much in mind, but it is not for me to say what will be the disposition of ministerial personnel in the autumn. I have no doubt, however, that in the light of the Queen's Speech there will be plenty of opportunities for my hon. Friend to make exactly the speech that he seeks to make.

Mr. Willie W. Hamilton: Following the question of the hon. Member for Cambridgeshire, South-West (Sir A. Grant) on an early-day motion urging the increased privatisation of local authority services,


since the hon. Gentleman is not obliged to declare his own financial interest in these matters, will the Leader of the House give urgent consideration to a debate in Government time on the recent report on the outside financial interests of hon. Members?

Mr. Biffen: Yes; that is a very fair request.

Mr. Eric Forth (Mid-Worcestershire): Will my right hon. Friend give an undertaking that no decisions will be taken or commitments made, particularly those of a constitutional nature, at any inter-governmental conference that may take place between now and the return of the House after the summer recess before the House is given the fullest possible opportunity to debate the proposals?

Mr. Biffen: The best that I can do is to refer my hon. Friend's request, for which I have a lively sympathy, to my right hon. and learned Friend the Foreign Secretary.

Mr. Eddie Loyden: Can the Leader of the House say what provision will be made for the recall of Parliament during the summer recess to deal with the problems facing certain local authorities—for example, Liverpool, Lambeth and Edinburgh? Is it not a fact that Parliament would have to be recalled to make a decision before anything could be done? Can he say what will be his intentions during the long summer recess to deal with this very important question?

Mr. Biffen: At this stage I am trying to get to the point where I can recommend to the House that it adjourns. Unless and until I have got that far I would not want to think about its premature recall.

Mr. Harry Greenway: Will my right hon. Friend say when we might expect to hear the Government's intentions in relation to the House of Lords amendments to the Education (Corporal Punishment) Bill? Will he bear in mind the widespread objection that there would be in the country to making that Bill an abolition Bill?

Mr. Biffen: That is still under consideration, and at this point I have nothing further to add.

Mr. Ron Brown: Bearing in mind that a poll organised by the Edinburgh Evening News—not a Socialist paper—indicated 65 per cent. support for the so-called rebel Labour council, will the Leader of the House arrange another debate next week so that the alliance especially may show its support for the Government? It is clear that locally the alliance supports the Tories. Will the Leader of the House ensure that democracy speaks and that the alliance explains its true position?

Mr. Biffen: Last night's debate on the affairs of Edinburgh was rather enjoyable, and things are never quite as good a second time round.

Mr. Richard Holt: My right hon. Friend will not be surprised if I return to the theme of law and order and say that throughout the country there will be great disappointment that once again there is not to be a full debate on the subject in the House of Commons, particularly in the light of the remarks this week of the Prime Minister and the Police Federation. Will my right hon. Friend accept that, whether he wants to debate it or not, it is probably the second most important subject that the people of Britain want to have debated in the House?

Mr. Biffen: I note what my hon. Friend says. I am sure that he, meanwhile, will be considering how best he can ensure that the matter comes before the House during the Consolidated Fund debate on Wednesday.

Mr. Tom Clarke: In view of the decision of the House of Representatives in the United States on South Africa, and South Africa's invasion of Botswana, can the House look forward to a debate on South Africa before the recess?

Mr. Biffen: Clearly there will be no debate in Government time, as is indicted by the programme of business that I have announced for next week. I accept at once the seriousness of the situation, but I am sure that it is a topic that will await us in the autumn.

Mr. Peter Bruinvels: Although the House is to be very busy next week, will my right hon. Friend give serious consideration to having a debate on the workings of the local DHSS branch offices in Leicester, which in the past week have been working to rule? Some of the civil servants and members of the Society of Civil and Public Servants have refused to handle my constituents' claims on the ground that the union is fighting to have no more overtime and no casuals allowed to help. Is not that a shocking situation? Should not my right hon. Friend provide time to protect my constituents who need to have their claims answered?

Mr. Biffen: My hon. Friend has outlined a thoroughly unsatisfactory situation. He may well find that there will be opportunities in the Adjournment debates, or in the debate on the Consolidated Fund, for the matter to be raised.

Mr. D. N. Campbell-Savours: In the light of the loss of the Unborn Children (Protection) Bill of the right hon. Member for South Down (Mr. Powell), will the Leader of the House, during the course of Cabinet meetings in the recess, impress upon his Cabinet colleagues the need to introduce a Bill based on Warnock, or some related measure, during the next Session of Parliament, and for its inclusion in the Queen's Speech?
Further, may we have a debate on genetic engineering in the first month of the next Session?

Mr. Biffen: I can give no undertaking to provide time for a debate on genetic engineering in Government time. The hon. Gentleman will appreciate that in no sense can I anticipate what might be in the Queen's Speech.

Mr. Edward Leigh: Has my right hon. Friend noticed that, on Tuesday afternoon, I shall be seeking leave to introduce the Local Government (Prevention of Political Corruption) Bill under the ten-minute rule procedure in the light of widespread abuse under sections 137 and 142 of the Local Government Act 1972 by Labour local authorities passing ratepayers' money to their political supporters and advertising pet political causes? If I am fortunate enough to be given leave to introduce my Bill, will my right hon. Friend give it Government time?

Mr. Biffen: It would be the denial of any prudent sense of optimism if I were to encourage my hon. Friend to think that he could do other than get a propaganda coup on Tuesday.

Mr. Tam Dalyell: Will there be a debate or a statement on the policy to withdraw the Hercules from Ethiopia?
Is the Leader of the House happy that there will apparently be no further statement on the Government's role in regard to Johnson Matthey Bankers? Does he think it satisfactory that Sir Patrick Sargeant and others can, on the radio, publicly cast the most serious aspersions by implication on the professional competence of the officials of the Bank of England? Does the right hon. Gentleman agree that some of us do not believe that Mr. Kit McMahon and others in the Bank of England did not at least consult officials before acting in regard to Johnson Matthey Bankers? May we be told when the Prime Minister and the Cabinet Secretary were warned from circles relative to the bullion market and the gold market that there was possible fraud in relation to Johnson Matthey Bankers?

Mr. Biffen: The hon. Gentleman raises issues that go very wide. In respect of Johnson Matthey Bankers, the matter might be ventilated on the Consolidated Fund debates and the Adjournment debates on Friday. As for the use of the Hercules for famine relief in Abyssinia, I shall refer the hon. Gentleman's points to my right hon. Friend the Minister for Overseas Development.

Mrs. Ann Clwyd: Will the Leader of the House ask the Secretary of State for Wales to make a statement next week about rising unemployment in Wales, especially as the National Coal Board has today announced the closure of yet another pit in my constituency? My constituency already has the highest male unemployment in Wales—28 per cent.—and it will now rise to 33 per cent. As Wales is continually being denied investment by the NCB, will the right hon, Gentleman ask the Secretary of State for Wales to say how he intends to increase employment prospects in Wales, especially in my constituency?

Mr. Biffen: Although I do not accept the implications of what the hon. Lady is arguing, I realise that the matter has a real constituency consequence and I shall most certainly pass on her request to my right hon. Friend the Secretary of State for Wales.

Mr. Jeremy Corbyn: Is the Leader of the House aware that, on 29 May, the Home Secretary imposed a visa restriction on all people wishing to leave the Commonwealth country of Sri Lanka to travel to Britain? Is he further aware that it is unprecedented for such an imposition to be made on a Commonwealth country? In answer to successive questions, the Leader of the House has given an undertaking that the matter will be debated before the summer recess and that it will be debated and voted upon at the same time as the immigration rules next Tuesday. May we have an assurance that this issue will come up next Tuesday and that there will be a separate discussion and vote on this aspect of Government attacks on people seeking refuge and asylum in Britain?

Mr. Biffen: The second item of business that I announced for Tuesday was the motion relating to the statement of changes in immigration rules, Cmnd. 9539. I am sure that the hon. Gentleman will be able to make his speech then.

Mr. Robert Parry: Will the Leader of the House ask the Prime Minister to visit

Liverpool during the long recess to meet councillors, trade union leaders, the unemployed, the sick and pensioners to see what damage the Government's policies have done to the city? Will she do that before she agrees to a commissioner being sent in to Liverpool and the possible gaoling of elected councillors?

Mr. Biffen: As the request has been put to me, I shall of course pass it to my right hon. Friend.

Mr. Greville Janner: In view of the attacks made in the House on the devoted people who work in the understaffed offices of the DHSS in Leicester and elsewhere and who are sick to death of being blamed for their inability to serve the public, which is caused entirely by the Government's reduction in resources, when may we have a debate which will let it be known how deeply we deplore those attacks on such excellent public servants?

Mr. Biffen: I am sorry that the hon. and learned Gentleman, whom I have known all these years, should be so nettled by the advocacy of my hon. Friend the Member for Leicester, East (Mr. Bruinvels). I suggest that the hon. and learned Gentleman, no less than my hon. Friend, should look to the occasion of the Consolidated Fund.

Mr. Max Madden: Will the Leader of the House use his best endeavours to ensure that a statement is made next week on safety at sports grounds? Will he confirm or deny the fact that Mr. Justice Popplewell's interim report into the Bradford fire disaster is with the Home Secretary or will be within a few days? As that report may contain important lessons for football clubs throughout the country, does the right hon. Gentleman agree that it would be intolerable if we were to go into the recess without having an opportunity to put questions to the Government on that important matter?

Mr. Biffen: I recognise that there is a widespread desire that, if Mr. Justice Popplewell's interim report is available, the House should have a chance to hear a statement on it.

Mr. Robert N. Wareing: In view of the United States' continuing threat of aggression against Nicaragua and the participation by Right-wing extremists from this country, including the vice-chairman of the Federation of Conservative Students, who have gone on patrol with the Contra terrorists in that country, is it not about time that we had a full debate on the problems in Central America?

Mr. Biffen: I suspect that the Federation of Conservative Students frightens me much more than it frightens the Sandinistras. The hon. Gentleman's other request will of course be considered.

Dr. Norman A. Godman: Does the Leader of the House agree that Scottish Question Time should appear more frequently in the parliamentary timetable?

Mr. Biffen: However I answer that question I shall be crucified. It is a very ungenerous question to put in the closing days of the Session.

Consolidated Fund Bill and Summer Adjournment

Mr. Speaker: I have a short statement to make about arrangements for the debate on the motion for the Adjournment which will follow the passing of the Consolidated Fund Bill on Wednesday 24 July.
Members should submit their subjects to my office not later than 9 am on Tuesday 23 July. A list showing the subjects and times will be published later that day. Normally the time allotted will not exceed one and a half hours, but I propose to exercise a discretion to allow one or two debates to continue for rather longer, up to a maximum of three hours.
Where identical or similar subjects have been entered by different Members whose names are drawn in the ballot, only the first name will be shown on the list. As some debates may not last the full time allotted to them, it is the responsibility of Members to keep in touch with developments if they are not to miss their turn.
In addition, I remind hon. Members that, on the motion for the Adjournment of the House on Friday 26 July, up to eight Members may raise, with Ministers, subjects of their own choice. Applications should reach my office by 10 pm on Monday next. A ballot will be held on Tuesday morning and the result made known as soon as possible thereafter.

Estimates Day

[4TH ALLOTTED DAY]—considered

ESTIMATES 1985–86

Department of Trade and Industry

CLASS IV, VOTE 4

Motion made, and Question proposed,
That a further sum not exceeding £39,501,000 be granted to Her Majesty out of the Consolidated fund to defray the charges which will come in course of payment during the year ending on 31st March 1986 for expenditure by the Department of Trade and Industry on export promotion, trade co-operation, regulation of trading practices and consumer protection, and other services including grants in aid and international subscriptions, and other grants.—[Mr. Channon.]

Mr. Speaker: I remind the House that the debate should relate to United Kingdom trade with China following the approval by the House of the recommendations of the Liaison Committee.

Mr. Kenneth Warren: I wish to speak on the motion on class IV, vote 4, because it is clear from the report which the Select Committee on Trade and Industry had the honour to present to Parliament on Monday of this week that we are worried about the adequacy of the vote and wish it to be examined during today's debate, and further examined by the Governirent in the light of the contributions that I am sure hon. Members on both sides of the House will wish to make.
As Chairman of that Committee, I express my thanks to the hon. Members who helped in the preparation of the report, who were assiduous in carrying out the investigation and who conducted themselves extremely well during our visit to China to examine the problems and opportunities of trade with that country. I hope that it is not inopportune or out of order for me to say that the clerks and staff of the Committee performed an excellent task. Although they are not often praised in the House, may I also thank the printers, Greenaway Harrison Ltd., who not only last Friday produced a proof of the report, but had it on the desks of the Committee's members at 10 o'clock on Monday morning.
We visited China as the guests of the financial and economic committee of the National People's Congress of the People's Republic of China, and had the honour of being met by Vice-Premier Li Peng. The embassy of the People's Republic in London and our embassy in Peking rendered tremendous service to us, and we wish to thank Sir Richard Evans and his staff, especially Mr. Charles Haswell, who accompanied the Committee on its tour. We also wish to thank Mr. Christian Adams and Mr. Andrew Seaton of the British Trade Commission in Hong Kong for the assistance that they gave us.
The House may already have sensed from what I have said that the tone of our report is one of earnest desire, and the belief that it is possible to co-operate with the People's Republic, to the benefit of everyone in Britain, through advancing our trade. Our Committee is solution-oriented. The reports that we have published demonstrate that it is not problem-dominated. All our reports to the House—I


cannot promise that this will continue—have been unanimous and have sought to be constructive, but we have not hesitated, as Ministers from the Department of Trade and Industry will know, to confront them when we believed that such confrontation would be constructive.
China is a buyer's market. It is also the last great untapped market in the world. It is a difficult market, and we praise British exporters for the quality of their products and the success that they have already achieved. However, if I tell the House that, if one travelled through China and saw 1 million people a week, it would take 20 years to see the entire population, hon. Members can gauge the size of the market, the country and, I hope, the opportunity.
Most people talk about the high technology goods needed in countries such as China, but there are many opportunities for exporting what could be called low-technology goods. We could also export what I could call, without wishing to denigrate the value of the products, second-hand goods, because China is moving up the scale of economic development and needs many of the products and processes that were common in the west 10, 20 or 30 years ago.
The Chinese market does not only present opportunities to export hardware. The Chinese need advice in accountancy, banking, insurance and international trading practices. They also need product support to meet the priorities that they have designated as the lead tasks of the next five-year plan, which will be launched in January 1986. Those tasks are designed to meet their needs in energy, transportation and communications.
I must report that the position of our sales to China is less one of accomplishment than one of opportunity. Britain is a long way down the list of OECD countries that export to China. It supplies only about 3 per cent. of all exports to China, which compares badly with Japan and the United States, which together supply about two thirds of China's imported goods and services. We are outranked by Japan, whose exports are worth £4·5 billion a year, the United States at £2 billion a year, West Germany and Canada at £700 million a year each and Australia at £500 million a year. Britain's exports are worth only £300 million a year. The Committee believes—I am sure that this will be endorsed by other hon. Members—that Britain is not exploiting all the available opportunities. Whatever the Government can do to make such exploitation possible will not only benefit employment and profit in Britain, but will give pleasure to the Chinese Government who, after the signing of the Hong Kong agreement, wish to trade with us. I am sure that we could take advantage of that.

Dr. Norman A. Godman: One of the most important industries in Scotland is the offshore oil and gas construction industry. That industry must be export-minded in its approach to further developments. Does the hon. Gentleman believe that enough is being done in China to persuade the Chinese to purchase such high-technology hardware from the United Kingdom?

Mr. Warren: We discovered that, although a great deal is being done in all industries, it is not enough. When we met representatives of operators in the South China sea and in the Bohai sea, we discovered that in many cases the Chinese were eager for the most basic help, such as writing

specifications to determine the quality of goods that should be demanded of those who supply them. Bristow Helicopters is already there, and British Petroleum is already drilling. The expertise of BP in the Forties field is directly applicable to the opportunities that lie in the deeper waters to the south of China.
During our visit to Canton, we met representatives and the general managers of the companies which, under the Chinese Government, are responsible for the exploitation of those oil reserves. Although no deal of significant commercial quality has yet been struck, British representatives still believe that they will be successful. I hope that the other members of the Committee will agree with me when I urge those who have that unusual expertise in deep-water oil exploration off the Scottish coast to get together with their Chinese colleagues. As the House knows, in offshore engineering, the ability to supply products and services immediately is paramount. No lead time is available. Companies must be there on the day that oil is struck. I value the hon. Gentleman's intervention and commend it to the House.
The Select Committee members were not the only people to express the views set out in our report. I hope that the House will be glad to hear about a letter sent to me on 5 July 1985 by my right hon. Friend the Prime Minister, following the visit of the Chinese Premier to Britain. She said:
The Chinese Government share our view that the opportunities for expanding our trade and economic links have never been better. I believe the committee have chosen an opportune moment to investigate this important subject.
As we travelled extensively throughout China, we were given shopping lists of Chinese requirements in every city and plant that we visited. Without doubt, the leadership of China has created eagerness and a dedication to economic growth at all levels of authority, and the wish to succeed is strong in the Chinese people. On a personal note, I should add that it was rare to come across people of such universally high intelligence in whom good sense is a common quality.
Until recently, Chinese financial reserves were strong, but they have been spending quickly. However, it was evident from our discussions in China and from discussions held with our visitors when the Chinese Premier came to Britain that they are conscious that their rate of spend must be matched to their ability to replenish their resources.
Recently, they have imposed certain constrictions on the way in which goods are handled for imports, but, on the other hand, they have opened up military facilities to make sure that waiting time does not attract a penalty in delivery for goods that have already been contracted. None of my hon. Friends will accuse me of being a sympathiser with Communism, but I sense that there was an economic pragmatism there in the best interests of the Chinese people in terms of what they were trying to do to develop their country.
I was also impressed by the way in which young science and business technocrats of the post-cultural revolution generation are the allies of the old guard in economic development and take an active part in policy discussions. These youngsters are causing an interesting ratchet effect. They believe that forward is the only direction of motion after the experience of Maoism and the cultural revolution.
The Hong Kong agreement is an important step forward. The Select Committee, having had the


opportunity to visit China and Hong Kong. knows that the Hong Kong agreement is regarded by the Chinese as a bridge of opportunity between our two countries that is not sensed as clearly on this side of the bridge, in Parliament and the country.
The period of the next five-year plan starting in January 1986 gives us enormous trade penetration opportunities while it is being drafted over the next several months. In this plan, the Chinese will be accentuating the need for two-way trade, whereas we all tend to regard exports as being the prime opportunity. I hope that we can understand that, to import, the Chinese have to export. If we acknowledge this, we shall have made a gain over other nations that have ignored this. I have to say this rather quietly, lest others take note of what a humble Chairman of a Select Committee says.
Without any qualification, I can say that the big United Kingdom firms such as British Aerospace, GEC and others in that league are establishing sound credibility that can enhance the opportunities for small firms, and the important factor is not only the totality of the contracts that go to them. From information that we have gleaned from them, probably only about one third of the total value of the contract goes to the prime contractor. Two thirds of the value will go to those down the chain of contract, most of whom will be small firms. Small firms should look at China through the eyes of their large suppliers and not give up the chance of selling in Hong Kong through reputable agents and straight into China the products and processes that they have available. In this connection I was disappointed to find how few manuals of goods and services representing the interests and capabilities of small firms were readily available either in China or Hong Kong.
I declare an interest as an engineer, although not one connected with China. Looking through such eyes, I saw colossal problems in Chinese engineering firms, some of which were the fault of suppliers, although not British suppliers. The standard and quality of that which this country could provide and the knowledge that, in dealing with this country, the Chinese will get a straight deal that will carry them forward is something that we should put forward in our own determination through diplomatic, commercial and trade channels at every opportunity. We supply quality, and that is what people in China want.
In getting what they want, the Chinese have to understand what is available. I have referred to those goods and services that can be made known through various normal trade communication channels. However, training and retraining in the United Kingdom of commercial, technical and particularly managing staff, sponsored by partnerships between the Government and state and private companies, is most important. This would be a cost-effective method to promote trade.
I have already given a long list of favourable comments about trade with China, and, to be constructive, I would be failing in my duty if I did not also make some unfavourable comments. It is obvious that there must be uncertainty about the future of society in China. There have been political upheavals over a number of years, but the present stability seems better than that which existed when I visited the country four years ago. Substantial progress has been made, and I had a welcome shock at the way in which ordinary Chinese people have been able to make progress in their personal lives.
Market penetration is enormously difficult, slow and expensive. Just about every representative of a major

company to whom we talked in Peking told us that it cost them £50,000 a year to keep just one person there, excluding the salary. It is obvious that, as it is a Communist state, purchasing machinery is politically based, and, naturally, there are tensions between state and political authorities over industrial objectives. They arise from the fact that central Government have decided that they will sub-contract responsibility down the chain to the provinces, with the results that one might expect.
When one exports to China, one is faced—this is no reflection on the Chinese—with the fact that their purchasing skills are poor. A hard deal is not necessarily in the best interest of the buyer any more than it is necessarily in the worst interests of the supplier. It is always important that one should, within the limits of language and definition, have a deal that is happy on both sides. I hope that the Chinese can move forward to promote sensible customer-supplier relationships, to their benefit as well as the benefit of those whom we are supplying.
I have already, in reply to an intervention by the hon. Member for Greenock and Port Glasgow (Dr. Godman), drawn attention to the fact that a substantial upgrading is required in Chinese systems of specifications and a knowledge of how quality assurance can operate, as opposed to what is called quality control. It is important that they understand the technology of quality assurance, which is practised in the Western world and which they are eager to obtain. That is an opening for British companies that can export such knowledge, and an opportunity for small companies at that.
The British Executive Service Overseas—BESO—has some retired, or supposedly retired, managers and engineers who rendered an enormous service to the rest of the world and have already proved themselves in China. I have found out from it that in one year the voluntary retired managers and engineers, a part of BESO that is jointly funded by Government and management, has received a request for specialist advice from the Chinese for chemical, steel, vehicle, ceramic, electronic and light manufacturing industries specifically linked by the Chinese to their re-equipment needs.
BESO has already completed some 12 assignments, which have yielded new contacts with potential British suppliers. It stresses the fact, and I endorse it, that contact and communication, however achieved, are keys to the trading expansion in the China market.
I must give a personal impression of Hong Kong, which I am sure will not be supported by other members of the Committee. I was surprised at it because I had had the opportunity to visit Hong Kong on a number of previous occasions. When I sat down opposite representatives of the Hong Kong Government, I rather felt as though I were facing not my allies but a foreign Government. With 1997 only 12 years away—I say only 12 years because when one looks back 12 years one realises how short 12 years can be—there was not the coming together of purpose that must develop between the British and Hong Kong Governments as the identity of interest becomes coincidental. The Chinese Government are both a Government of an independent territory and a partner Government in a joint agreement with us. I am aware of the high standards and good practices of those who participate in the Government of Hong Kong, and we were delighted that they were so helpful to us. I hope that my personal comment will be seen to be constructive. The


Hong Kong Government may not have recognised their responsibility for the promotion of United Kingdom exports, but I hope that they will as we approach 1997. The Hong Kong agreement, seen from China, and as it should be seen from the United Kingdom, may not appear in the same light from Hong Kong, but I hope that the vision will shortly become the same for all three.
The Chinese certainly expect our Government to act vigorously as a constant partner in United Kingdom enterprises selling into China. The Chinese leadership is inexperienced in world trade practices. That is not a critical but a constructive comment. They certainly gauge the credibility of a foreign trader by their standards, and they study how the trader's Government help him to promote his products. The Select Committee has said without qualification that the visible and practical partnership rationale, including soft loans, should and must be a facet of growing importance.
Other hon. Members wish to speak, and they will no doubt enlarge on the 12 recommendations submitted in our report.

Mr. Bowen Wells: From which budget does my hon. Friend see additional soft loans being made available? Is he thinking of the Overseas Development Administration budget, aid and trade provision assistance or some other source?

Mr. Warren: It is always nice when an hon. Friend reminds me of what I should say. I was about to come to that point, which is difficult to answer. Rather than decide from which budget the additional loans should come, all available Government resources, whether from the Export Credits Guarantee Department, ATP provision or whatever, should be considered together as total assistance. The various sources should not be presented as an obstacle course to British exporters. At present traders must often look into the ECGD or argue a case for a soft loan. We welcome the Government's recent announcement that soft loans will be granted to Indonesia, and we hope that that is merely the litmus test to prove that they work. One cannot ignore the way in which competitors and their Governments support their exports. There is no point in saying that that cannot be done, because it must be done, and we must get on with it without hesitation.
I must be daring and criticise my Government because I am a Select Committee Chairman. The Select Committee was dismayed at the statement on 10 July from the Department of Trade and Industry. Paragraph 3, dealing wih soft loans, states:
Officials are discussing with the financial community what mechanism might be devised for providing soft loans. It will be some time before these arrangements can be finalised.
There is no time. That must be done now. I ask my right hon. Friend the Minister for Trade to tackle the problem without hesitation, and to respond to that challenge today.

Mr. Tam Dalyell: During his interesting visit, did the hon. Gentleman hear about the work of the overseas projects board? Some hon. Members believe that the United Kingdom should give much more help to our overseas projects, considering what other countries are doing.

Mr. Warren: The hon. Gentleman refers to the point that I was making. The total available resources should be considered together rather than separately.
In the report's conclusions we stated the need for a positive commitment by United Kingdom companies, if they are to enjoy a share in the growth of the Chinese market. It is easy to pontificate, and I must declare an interest in that in the past I had a great opportunity, and much misery, in trying to export overseas. A previous Prime Minister said that exporting was fun, but the only fun that I found was when I succeeded, and that was less often than I failed. A long-term commitment towards China is needed. The Chinese like working with people whom they know. I recommend that British companies hang in there. Success will undoubtedly come when the Chinese become used to working with them and know about them.
It is essential that British companies send appropriate executives. The eager salesman will not do. They must send the sales director to China so that he may be given the appropriate introductions in China. Chinese business can be enhanced through a partnership with British business men. They should tour the various symposia which are organised, especially by the provinces in China. We visited Sichuan province, which has a population twice the size of that of the United Kingdom. I am fond of making the analogy that an increase of only 2 per cent. in the telephone lines in China would be equivalent to the whole of British Telecom. The opportunities are enormous and we should not merely consider the opportunities in the capital, the coastal cities or special economic zones.
The Government have a stronger duty than they may be seen to perform at present to collect intelligence information, as the Americans do. They have a stronger duty to fight to prevent people from stopping COCOM from exporting products which have no military significance to China. I am extremely worried at the rumours about substantial American computer companies engaging in sales drives in China. We fear that soon they will say that the items can be sold, and they will tell COCOM that they can be sold. By then we shall have been outflanked, and will be without a chance of bidding for the contracts, some of which are said to be worth $800 million.
COCOM is a voluntary organisation, which has no legality. It operates a sound principle of standing up against the dangers of exporting to Warsaw pact countries, but there can be no rationale for refusing to export commercial standard micro-electronic circuits, which can never be used in military applications, to China.
We recommend an increase in staffing and in the quality of staff available at our embassy in Peking, our consulate in Shanghai, and our representation in Hong Kong, which covers much of south China. Government support should follow trade opportunities. To look at the size of China through the eyes of the Treasury may be a myopia which cannot be tolerated by British exporters. The Government must recognise the opportunities and the rewards that can come from backing our exporters with the support and services that only they can provide, and that the Chinese expect to be available to our exporters.
One is amazed at the volume of work that our people in China carry out to support our Government. If the Government, even a non-interventionist Government, choose to play the part of entrepreneur, they must be the entrepreneur and not stint themselves. If ECGD cannot back projects exporting to China, Turkey or anywhere where somebody wants to give a company a contract, I hope that the Government will look at the market, go to


the City and encourage merchant bankers who, I understand, are eager to have the opportunity to get in there and support the export credit guarantee business.
It is my belief that Her Majesty's Government can and must provide accelerators of opportunity. The British Overseas Trade Board is a good organisation which deserves more support. The Export Credits Guarantee Department, which we examined in detail, is also a good organisation that deserves more support. The Overseas Development Administration and all the other agencies are working effectively. One could criticise them in some detail, but we should like them to be seen collectively and to be assured that they have the support of the whole of Her Majesty's Government. I have referred to soft loans. I merely reinforce my request that they should be acted on as an opportunity without which British exporters will lose out in the short term, and riot just the day after tomorrow.
The United Kingdom is a great commercial nation. We are innovative and constructive. None of us is other than eager to prove our capability in competition and our competitiveness in price, quality and delivery. That we have made known to the Chinese. They would welcome a further demonstration of it not only through the products that they have already contracted but through further bids. They are well aware of our capabilities and eager to work with us.
I should like to place a challenge before Her Majesty's Government to respond equally, to play the part that they must play to represent our commercial strength without qualification or hesitation but with favour to all those who now take their exporting talents into the new world of opportunity that China offers us, a world where we can gain in employment and mutual profit, and above all where we can gain in peace between two nations that want to live together.

Mr. Stan Crowther: I am happy to follow the hon. Member for Hastings and Rye (Mr. Warren). It may be appropriate for me to take this opportunity, despite our obvious political differences, to pay tribute to his excellent work as Chairman of the Committee.
It has been obvious for a long time that British manufacturers suffer from a variety of disadvantages compared with competitors in most developed countries. Like other hon. Members, I have drawn attention to them many times in the Chamber. For example, despite certain recent changes, energy costs are still a disadvantage to British manufacturers. Again, despite recent changes in the rate between sterling and the dollar, exchange rates are still creating problems. Many industrialists assure me that the pound sterling is still grossly overvalued against European currencies, and it is in Europe that our main competitors are based. Interest rates are also an intolerable burden on British industry.
However, even if the British manufacturer can overcome all those obstacles, he is still up against the fact that the British Government do not provide him with the backing in the export market that most other Governments provide for their exporters. That is the essence of the debate.
I get worried about the extent to which the British Government take the holier-than-thou attitude—that we must never step one inch outside the rules of international trade, whatever others may do. I am not urging the

Government to go around the world breaking the rules, but I wish that they were as expert at bending the rules as others. That is all that I ask. If we compare the attitude not only of this Government but of others over the years with that of the French, German, Japanese and American Governments, we find that we are always the righteous ones. The others do not care very much. If they can get away with it, they will break any rule in the book, to the enormous advantage of their industries. That matter should be seriously considered. I make that point not only in relation to China, but in general, although I appreciate that the debate is particularly about trade with China.
The Government should be very worried about the fact that West Germany is exporting almost three times as much to China as we are. If the Government are not worried about that, they should be. If they are, I hope to hear from the Minister what they propose to do about it.
During the detailed inquiry carried out by the Select Committee, we learnt about the immense opportunities for increased trade with China. I do not wish to repeat what was said by the hon. Member for Hastings and Rye in his excellent speech, but I agree with almost everything that he said.
Certain things need to be done. We made a series of recommendations in our report on which I hope action will be taken. I should like to quote just one example of the sort of potential that there is in China. The Committee was stranded for a day in Dalian in north China. It is a huge industrial city with a population of 4·5 million. We were stuck there simply because a bit of mist came down on the airport. It was nothing serious, but it meant that flying was suspended because there are no radar installations in the airport. I do not know whether the General Electric Company, Marconi or other British companies in that business, which are already established in China, have noticed that. If they have, I do riot know whether they have tried to do anything about it. Most important—I do not know this, either—if those companies have tried to do something about it, have they been stopped by the COCOM restrictions? That is the most worrying feature. On the wildest stretch of imagination, no one could pretend that putting radar into Dalian airport could present a military threat to Great Britain. To suggest such a thing would he ludicrous. That is an example of the sort of thing that is now worrying me about our failure so far to take advantage of the opportunities that are there.

Mr. Dalyell: I should like to reinforce my hon. Friend's important point. My constituents at Hewlett Packard, which supplies precisely such communications equipment, are extremely worried about that, and the chairman of the company, Mr. David Baldwin, has brought the matter to the attention of the Department.

Mr. Crowther: I am grateful to my hon. Friend for his comment. No doubt he will have noticed our recommendation on that point in the report.
One area in which China is most anxious to develop is railway transport. There are tremendous opportunities for British industry. After all, Britain used to be the world leader in the manufacture of locomotives and other railway rolling stock. It is not an awful long time since the railway and ring rolled products department of the British Steel Corporation in my constituency had a substantial export market. Regrettably, it has contracted now; but here is a tremendous opportunity for increasing exports in a big way.
I should like to know what plans British locomotive manufacturers are making in conjunction with the Government to break into and take a big slice of the Chinese market. If they are not making such plans, they should be. If the Government are not helping them to make such plans, they ought to be. The essence of what I am saying is that there should be partnership between the Government and industry, because on that basis we can succeed. Industry cannot go out on a limb without backing from the Government and expect to succeed, because it is up against the far more effective operations of foreign Governments who look after their industries much better than we look after ours.
I hope I am wrong, but my impression is that Ministers do not know and do not care very much about this great potential market. I see little evidence so far that they have taken it seriously. Indeed, I see evidence that they are not taking it seriously. An example of that is the reduction in the resources available to the British Overseas Trade Board. That has caused concern to many British manufacturers, not only in relation to trade with China, but in other connections.
The British Materials Export Group has expressed serious concern about the reductions in BOTB resources. A flat rate has been set for the next three years, but in practice that means a cut over that period. The view of the BMEG is that overseas trade fairs are the most effective means of supporting small and medium-sized firms in new markets. We heard evidence in the Committee that resources for overseas trade fairs have been reduced and, as the BMEG points out, it is small and medium-sized firms which benefit most from this kind of activity; they are supposed to be the firms that the Government are most anxious to support.
In a written question on 24 June 1985 I queried the action of BOTB in withdrawing from the Interbuild exhibition in Birmingham. That is an important exhibition for people in the building materials industry, and the organisers were hoping for a substantial inward mission of buyers from all over the world, including China. Our overseas posts were led to believe by the BOTB, right up to the end of March, that BOTB resources would be available to help finance this inward mission to the Interbuild exhibition. But at the last minute the board said, "Sorry, we have no money."
The written answer which I received from the Minister assured me that the decision not to provide British Overseas Trade Board support for the inward mission to Interbuild '85 was based not on eligibility but on the availability of funds. That is precisely the opposite direction to that in which we ought to be going. We should be putting more resources into this kind of promotion. I am afraid that unless there is a substantial change in the Government's attitude towards organisations like the BOTB, all the reports of Select Committees are going to be a waste of time.
What is going to be done about the size of our embassy staff in Peking? All the members of the Select Committee were alarmed to find that only five people were employed in the commercial section of the embassy. China is the biggest country in the world and it has an enormous potential market. I entirely support the hon. Member for Hastings and Rye in his praise of the staff. They are excellent people, but there are too few of them. As a

result, they are not able to get around that huge country to look for opportunities for British business. They sit in Peking, mostly on routine 'work. We made a recommendation about that in the report, and I hope the Government will take it seriously.
What is the Government going to do to increase the number of Chinese students in British universities? I read in the "British Council News" in June about evidence given by the director-general of the British Council to the Foreign Affairs Select Committee. He was drawing attention to the fact that there are 10,000 overseas students in Japan, and that by the end of the century it is planned to have 100,000, most of them from south-east Asia. I am sure that many of them will also be from China.
We ought to pay more attention to the long-term benefits of having overseas students in our universities. The Committee drew attention to that in a previous inquiry in connection with the ASEAN countries. There is not the slightest doubt that a student who has had the benefit of attending a British university and who then returns to his own country, which may be China. Indonesia, Malaysia or wherever, is likely, when he attains a decision-making position, to be influenced in favour of the country where he received his advanced education.

Dr. Godman: I support everything my hon. Friend has said on the need to attract Chinese students to our universities. The obverse side of that coin is: how many British students are studying Chinese in our universities? How many of the members of our embassy in China are Chinese speakers? One of the most formidable barriers to the export of knowledge, which was mentioned by the Chairman of the Committee, the hon. Member for Hastings and Rye (Mr. Warren), is language. How many of our people in China are fluent in Chinese?

Mr. Crowther: I appreciate my hon. Friend's point. There are many Chinese speakers in the embassy. As to the other part of his question about the extent to which people in Britain are learning Chinese prior to going to seek trade in China, I cannot answer that. However, it is an extremely important question and I hope we can find the answer to it.
It has been said many times in this House that Britain, once the workshop of the world, is now, for the first time in its history, importing more manufactured goods than it exports. It was made clear to the Committee during a previous inquiry on trade with the EEC that that fact does not worry the Secretary of State, but it certainly worries many people. It worried the Committee and it certainly worries me. It worries people who take a responsible view about the future of this country. I am one of those old-fashioned folk who believe that manufacturing is at the heart of wealth creation. As we have established, there are enormous opportunities for British manufacturers to play a crucial role in the development of the Chinese economy, and that would be to the great benefit of both nations. If the Government fail to give British industry all the support they can in every possible way, the Government will not only have missed a great opportunity, but seriously neglected the national interest.

Sir Peter Emery: The first two speakers in this debate so far and the report illustrate the considerable help that the fairly new structure of Select Committees can 


be in highlighting certain factors, not only for the House but for the country as a whole. The real benefit is that we were able to investigate with and talk to manufacturers and exporters in Britain. In China we were able to see what is being achieved and how, I am afraid to say, some things are not being achieved. We were then able to analyse why that is so, and investigate what can be done to improve the situation. Therefore, if ever there was proof of the usefulness of Select Committees, this report is it.
The greatest opportunity for British industry to expand its exports massively lies on the mainland of China, and I am sorry that British industry is not taking up the challenge. It is not often that a nation is given an opportunity such as that now available to Britain. I say that because, before the settlement in Hong Kong, Britain was, if not the least favoured nation, quite a long way down the league table in trade with China. But, since the Hong Kong settlement, the opportunities are greater than ever before. The reason lies not only in what Britain has to provide. Another factor is involved. The Chinese Government, having escaped from the Red revolution and having had many of the tenets of Marxist Communism questioned, are considering the trading aspects of a Socialist economy. The Chinese have seen the problems caused by Russian imports into their industry, and they do not want to see America and Japan taking the place of Russia as a dominant factor in their industry. For that reason, they are more than welcoming to Britain and to British industry. We now have a honeymoon period of perhaps 18 months or two years in which that will remain the position. If we do not grasp the opportunity with both hands, we shall be extremely foolish.
I reinforce the views expressed both by my hon. Friend the Member for Hastings and Rye (Mr. Warren) and by the hon. Member for Rotherham (Mr. Crowther). There are three factors that British industry has to understand fully if it is to gain Chinese business. The first is the importance of the financial package attached to any business that they propose. The second is the technological input of that business. The third is the training that that business can bring.
There is no doubt in my mind that Britain has suffered because the Chinese have not thought that the British Government were really keen on doing business with them. Britain is the only major country to have done nothing to provide any soft lending to the Chinese Government. Finland, Denmark and Italy all provide soft funding arrangements to encourage business. Those arrangements are tied to industrial expansion in their countries. Yet the British Government have done nothing. The criticism from the Chinese is understandable. Whether it be with Government funds or whether it is done with some of the International Development Association and International Bank for Reconstruction and Development lending that is available and much of which has not been taken up, the Government could take a lead in trying to ensure that British firms were encouraged to trade overseas.
The second factor that will benefit any company trying to do business with China is to show that it is willing to share with the Chinese the technology that it is bringing into China. The criticism that I heard again and again was that the Chinese told this to the Japanese and American companies, but that they did nothing. We must show that we are willing to share that technology—I am talking not about the highest-tech defence equipment but about

medium and moderate technology which we have had for many years and which the Chinese will get in six or 10 years regardless of whether we help them. Why should not we help them and gain the industrial benefit?
It is obvious that we could take a lead in this way from some of our competitors, and I urge that it should go hand in hand with training. When we talk about exporting to China, we want to tie into the package the willingness of the exporter to take Chinese people and train them in marketing, in the technologies of the industry and in project management—a subject which they are still coming to understand. We should be offering the Chinese a degree of co-operation that they have not seen from many of the other firms trying to do business with them.
That ties in with the excellent contribution by the hon. Member for Rotherham about the need to ensure that we encourage Chinese students to come here. Nothing would please our universities more than to be given a little assistance from the Government so that this might be done.
I believe that the Government should be doing more, and I draw the attention of the Minister for Trade to an amendment proposed in the Committee but unfortunately not carried. It contains a considerable amount of sense because it underlines that aid ought to be tied to the business that we can obtain in China, especially in the next two years. If the Department of Trade and Industry cannot win the battle with the Treasury—it is not the DTI's wish not to get the money; the opposition is from what is frequently described as "the damned Treasury"—it may be that in conjunction with the Foreign and Commonwealth Office, even if the Committee's strong recommendations cannot be accepted, an expansion in aid to China could be made by the Government reallocating existing funds even if, for the next two years, it is done at the expense of the Commonwealth. I know that that will not be a popular suggestion, but we need to increase the aid that we give if we are to see the increase in industrial strength and the creation of wealth which will in turn enable yet more aid to be given. If we have not got that industrial strength, the amount of aid will decline. I have always believed in the advantages of tying aid to business.
British industry must realise the difficulties in its way. Reference has been made already to the language problem. In addition, the distance is considerable. Account must also be taken of the cost of living and maintenance in China. What is more, doing business in China is not simply a matter of getting hold of a potential customer and agreeing on a deal. One has to realise that central planning ministries have major importance. Further, the deal must be understood and accepted by the Treasury or the Finance Ministry. One has to realise that the deal must be acceptable to the Ministry with responsibility for the industry in question, and then one has to deal with the firm or organisation. That is why there is a time factor, and why many people have gone to China not understanding these problems and have come away disappointed. That is why it is important that we should spell out in the report exactly what has to be done.
However, I believe that the benefits are considerable. I believe that there is a special encouragement that the Chinese Government will be wanting to give to Britain in the next two years. They will riot give us anything—let us not believe that. It has to be a proper business deal. But I believe that, while in the past we have not been able to obtain the business, in future we will be able to do so.
I refer now to something which has not been mentioned so far in the debate, the aspect of joint ventures in China, which I believe the Chinese Government are very keen to stimulate involving the development of British industry' in China. I am not saying that we will be there for ever. I believe that, like most countries, in time the Chinese will want to take control of the totality of that joint venture, but if that joint venture is for a 10-year period or an 8-year period it ought to be a considerable benefit to Britain and, if properly structured, a considerable benefit to the firms that enter into it.
With regard to the great advantages and benefits that we have, we have Hong Kong business, which is already structured within Red China. I was amazed to find that some members of the National People's Congress of Red China had a visiting card giving the full title of a member of the People's Congress and another card which was the business card of a Hong Kong business man. Indeed, they were only too delighted to encourage one to come and see them and use their facilities for trying to do business in China. We have great friends in Hong Kong who are crying out to assist British business in parallel with their own expansion. But there is so much more that British business can do. Let us please realise the benefits that Hong Kong could provide as a permanent feature, enabling business to be carried on. That would help overcome some of the financial difficulties that people resident in the region experience in keeping full-time staff.
I believe that there is one factor that is an innovation. It is an innovation I welcome, and which should be trumpeted fairly hard. The Select Committee has decided to produce a guide, a small pamphlet. It will set out not the whole of the report but, as guidance for any person who wishes to consider doing business in China, the pitfalls, the advantages and many of the points which have been, and I know will continue to be, made in speeches in the debate.
I end as I began. The report is an illustration of what the Select Committees can do. We are innovating by producing direct assistance, as a Select Committee in the name of the House, enabling British business to achieve more exports. China is an area of great possibilities for expansion.

Mr. James Wallace: As the first Member to speak in the debate who is not a member of the Select Committee, I wish, I am sure on behalf of other Members not on the Committee to thank the Chairman and the members for this valuable report and to welcome the opportunity to debate it.
It has already been said that considerable importance must be attached to future trade with China, particularly because of its large market. I share the view of the hon. Member for Rotherham (Mr. Crowther) that it is a matter for concern, not complacency, that we are dipping into deficit on the balance of trade of manufactured goods. Because of the size of the population of China, there are clearly considerable opportunities.
I was a member of the all-party group which visited Japan in February this year. It was clear to us that Japan has recognised the potential of the Chinese market and is making every endeavour to take advantage of all the opportunities it offers.
We now have further opportunities because of China's open-door policy. We have reached an agreement with the Chinese Government on Hong Kong. As the hon. Member for Honiton (Sir P. Emery) said, our relationship with Hong Kong gives us particular advantages in being there on the doorstep, and we should take advantage of the settlement on Hong Kong.
There are particular opportunities for exports in high technology. China is in the process of modernisation. It is seeking to expand its telecommunications network. As has already been mentioned, it is developing its energy resources. The hon. Member for Greenock and Port Glasgow (Dr. Godman) referred to our potential, as a country that has already developed offshore oil resources, to export some of our offshore technology to China. When one considers the advantages Norway has taken from developing its offshore techniques. I sometimes regret that British industry has not latched on in the same way. None the less, there are still opportunities at home and, given the development of these technologies, for export to a very important market in China.
While there are obvious advantages and opportunities, there are also problems, some of which have already been mentioned. There is the basic problem of distance. There is also the question of culture—an oriental culture and a culture of a system based on centralised planning. The effort and time taken in achieving export orders in China will be much greater, for example, than is the case in trading relationships with our partners in the European Community. Nevertheless, I believe time and effort will be well spent. There is a tradition in the Chinese culture that, if a relationship of trust and good faith is built up and established, and a market developed over the years, they will be loyal to the products, if we give them high quality products.
The problem of language has been referred to. That is probably even more of a problem as one gets into the provinces of China and away from the main city centres. Japan clearly has certain advantages over us because of its proximity, and because it does not have quite the same language difficulties. The United States has certain advantages because it has within it second generation Chinese who perhaps fled from China but who are now going back with a knowledge of the culture and of the language. We can perhaps overcome some of our disadvantages by encouraging Chinese students to come and study in our universities. I think that that is one of the most effective ways in which we can promote trade in the longer term, as well as encouraging some of our students to learn Mandarin and Cantonese.
I do not want to overestimate the problem of language, but I discovered on my visit to Japan, and it may well be the same in China, that while in our embassy in Tokyo we have people who are very skilled linguists—and it is appreciated by the Japanese that those people have taken the time and effort to learn the language—they do not always have great commercial expertise. A lot more can be done to ensure that in the embassies, in particular in Beijing, our representatives not only are skilled in languages but also have a certain commercial nous.
The Select Committee report mentions the problems of exporting high technology, with particular reference to COCOM. There is no legal basis for COCOM and no treaty has been ratified by the House. Indeed, I do not think that COCOM's functions have ever been debated in the House. I have no doubt that there is merit in keeping


from our potential enemies in the Eastern bloc information that is important to our security. However, the worth of an organisation such as COCOM must be called into question if it is abused by other countries. As the hon. Member for Rotherham said, we always stick to the letter of the law, but other countries manage to bend it. Sir Peter Matthews told the Select Committee:
The goalposts get moved from time to time and they are usually moved by the Americans at strategic moments when they are just about to score a goal in the new position.
The first four annual reports of the export administration division of the United States commerce department showed that licences issued for computers and semi-conductor manufacturing equipment and electric test equipment between 1981 and 1983 resulted in substantial exports from the Unted States to China, totalling $98 million in 1980, $117 million in 1981 and rising to $143 million in 1983.
We should investigate whether the United States has been trying to get round the COCOM rules to establish a market in China at a time when pressure was being put on British-based companies, such as ICL, not to export. The American figures do not show the multi-million dollar deals done by American companies on the very day in 1983 when the Reagan Administration announced a significant relaxation in what they were prepared to allow to be exported to China. That included one deal of $800 million.
My hon. Friend the Member for Yeovil (Mr. Ashdown), who has looked into the matter in detail, has established that the Foreign Office was not advised of that relaxation and did not know about it until April 1984. The House is entitled to ask why the Foreign Office did not know and what liaison exists with the Americans, with whom we are supposed to enjoy a special relationship, and between the Department of Trade and Industry and the Foreign Office. Our exporters have been blocked, whilst last year IBM took four floors in the biggest hotel in Beijing for two months to offer a full range of IBM machines to the Chinese Government and officials. That is scarcely fair competition.
The House will be interested to hear from the Minister for Trade how the Government view the COCOM arrangements. Will he explain what has been happening in trade with China over the past three or four years? Why does the United States always get away with it, at the expense of our industries? Can the Minister confirm that the COCOM agreement is to be extended to cover software, in which we have particular expertise, and thereby further hinder the development of our export opportunities?
I welcome the Select Committee's recommendation that there should be a liberalisation of COCOM rules for trade with China. It is important that the Government ease trade relations with China, particularly for trade in high technology, but they must take other action, including the provision of soft loans and assistance to enable our industry to seize the opportunities that are open to us.
Even a Government committed to the free market must realise that in trying to build up trade relations with China we are not dealing with a free market. The aid and assistance given by our Government must be commensurate with the size of the opportunities open to our exporters.

Mr. Richard Page: A much more illustrious public speaker than I—which includes most public speakers—said that if one wanted to get a message over, one had to be like a hit record and keep repeating the theme time and again.
I am more than willing to follow up the theme that I developed in an Adjournment debate in the early hours of 1 April when I stressed that there had to be greater support for British exporters if we were to stay in the world of the manufacturer and provide jobs for our people.
I welcome the opportunity to re-emphasise some of the points made in that debate, and I endorse the thanks given to the Select Committee for its report, which will be a valuable talking point and shows the direction that we should follow.
In the world of exporting, we take about 8 per cent. of the market, but we take only 1 per cent. of the Chinese market. As my hon. Friend the Member for Honiton (Sir P. Emery) said, we are not taking advantage of the tremendous opportunities that are open to us. We have recently gone into surplus with our trade with China, but the opportunities still stretch ahead of us and could provide us with almost an El Dorado if we make the necessary efforts.
We must be careful and clever in going into the Chinese market. My hon. Friend the Member for Hastings and Rye (Mr. Warren) said that the Chinese had poor purchasing skills. They have already spent up to the hilt in their 1985 budgets and they will have problems providing any more orders for the rest of the year. We know that there is a five-year plan in China. Only the companies that get in early in the game will get the contracts. Those that hang around or come in late and those whose Governments do not support them early enough will lose out.
I welcome the provision of the £39 million in the Estimates, but I doubt whether it will be adequate to tackle the whole Chinese market. Over the past few years, the Japanese have put £3 billion into that market The Japanese are good at exporting. They have taught us one or two lessons and we should be wise to take the hint from them.
We do not realise the problems and the competition confronting us. Recipient countries are demanding that a support mechanism, such as soft loans, should be put up front when the tender is submitted. I understand that the Indonesians have passed a decree that no company can pre-qualify for tendering without agreeing to 25-year loan terms, grace periods and certain interest rates. I understand that China is making demands for similar terms. I have some evidence that the Japanese are offering 30-year loan terms, seven-year grace periods and 2·7 per cent. interest rates. We must stop trying to match those offers and initiate offers ourselves if we are to get the contracts.
Efforts have been made in the City to produce a private financial package. I welcome those efforts with all my heart, but whatever financial mechanisms are developed for soft loans, I doubt whether private sector arrangements will be enough.
If we are to make a worthwhile impact in China, it will cost us about £50 million annually. The Select Committee has recommended that funds should be increased so that resources for China are not diverted from other markets.


We have to retain a world presence as well as taking the opportunities in China. That implies that we cannot eat into the aid and trade provision of £66 million.
I emphasise what I said in my Adjournment debate. We must increase the flexibility of the aid and trade provision. It must roll on from year to year. and we must end the rigid divisions between sectors. We must not lose contracts because of various quirks of timing.
The Select Committee pointed out the value of establishing a presence in the Chinese market. It said:
there can be longer term advantages of establishing UK exporters in a growing Chinese market, where the repeat orders can make the loss leading worthwhile.
The value of additionality is not always fully taken into account when the Treasury does its tight and careful calculations.
The role of the British Overseas Trade Board in world markets has been mentioned. A striking fact is that the bulk of our overseas trade is in the hands of major corporations, but 80 per cent. of the users of the BOTB services are firms with fewer than 200 employees. The majority of contacts by the BOTB in 1984 were with small firms, which took advantage of the springboard offer to bring them into the export market.
We must make small profitable firms producing quality goods aware of the export opportunities and the services available. Too often when Ministers attend business functions they are told by small firm owners that they know nothing about the BOTB or about moving into the export market. In the next few years we must plan a modest increase in the BOTB's budget of £27 million a year to ensure that small companies are aware that they can almost piggy-back into the export market.
Earlier this month my hon. Friend the Under-Secretary of State for Trade and Industry said that 1 per cent. of our world trade creates 250,000 jobs. If we lose that world trade, the jobs will be lost. The converse also applies. For every 1 per cent. increase in our world trade, we shall gain 250,000 jobs.
The opportunity exists to do business with China. My hon. Friend the Member for Honiton made that point forcibly and ably. I welcome the extra support, but I hope for flexibility within the Treasury and the Department of Trade and Industry so that we can react quickly to opportunites to seize contracts.

Mr. Tam Dalyell: I agree with the hon. Member for Hertfordshire, South-West (Mr. Page) that quick reactions and flexibility are of vital importance.
I echo what the hon. Member for Orkney and Shetland (Mr. Wallace) said about paying tribute, where warranted, to the work of our parliamentary colleagues on both sides of the House who are Members of the Select Committee. I willingly pay that tribute because the report that we are discussing is of high quality. It is clear that hon. Members from both sides worked hard on the report and when they were in China. Such trips are not joyrides but hard work. I thank our parliamentary colleagues.
I strongly agree with the Chairman about the need for old friends. I understand that one can get nowhere with the Chinese unless they are old friends. I organised and went with the Scottish Council for Trade and Industry delegation to China 15 years ago. It was the first

delegation to go there. I might be asked why the Scots went. It was partly because some of us tried hard with Mr. Pei, the charge d'affaires. I shall believe until my dying day that there was some confusion about the Scots being like the Albanians—a small and oppressed group which should be encouraged. I do not kid the House when I say that we were taken to the Sino-Albanian friendship commune. It was a good delegation, which included Louis Portman of Leyland and a small mink farmer from Midlothian who is still in business. Since then I have counted myself as an old friend of China, albeit with ups and downs. That is my reason for taking part in the debate.
I could not agree more strongly with my hon. Friend the Member for Rotherham (Mr. Crowther) who eloquently expressed his feeling about the holier-than-thou attitude about which many of us have been worried for a long time. As my hon. Friend said, others seem to be more adept at bending the rules and cutting the corners than we are and we lose out time and again. That hits work and employment in Britain.
I wish to raise a specific point. Bluntly, I have a constituency axe to grind. Hewlett Packard has been in South Queensferry for two decades. Mr. David Baldwin and Mr. Denis Tompkins and their colleagues have pleaded with those who represent constituencies in which Hewlett Packard factories are based, and with the hon. Member for Wokingham (Sir W. van Straubenzee) who represents the area in which the firm has its headquarters, to do someting about the COCOM regulations. The subject was debated yesterday, and the Minister said:
Exports to China were mentioned by the hon. Member for Dagenham (Mr. Gould) and many of my hon. Friends. We are playing a leading part in talks in COCOM … My hon. Friend the Member for Orpington (Mr. Stanbrook) referred to Professor Ashworth's letter, to which I shall of course reply."—[Official Report, Fifth Standing Committee on Statutory Instruments, &amp;c., 17 July 1985; c. 25.]
I tabled a written question yesterday to ask
the Secretary of State for Trade and Industry, what conveniently available figures he has for the average time it takes a British exporter of high-technology equipment to receive a decision or a COCOM application, compared with the practice by Governments in Germany and Italy.
The answer was:
I regret that this information is not available.
I make no complaint about that reply because, as I said on Friday, I am against asking questions which lead to statistics which are expensive to find. If I am told that it is too expensive to find an answer to a question, in most circumstances I accept that.
Reputable people at Hewlett Packard say that their German and French colleagues receive much quicker answers than we can expect here. They say that the reason might be shortage of staff in the Department, but, whatever the reason, we must react more quickly. This is an all-party occasion, and I agree with the hon. Member for Honiton (Sir P. Emery) and others that flexibility and quick reaction are of great importance.
I hope that the House will forgive me if I quote three of Professor Ashworth's arguments. He said:
The British Government should urge COCOM to lift restrictions on trade in goods other than those which genuinely meet military applications.
The word "genuinely" should be emphasised. He went on:
The fact is that almost any civilian product or process technology could with time and determination be re-engineered to military use. But that is an argument for no trade and is being used to restrict market opportunities for British firms. If lines are


to be drawn let the restrictions apply to technologies which realise military applications rather than ones which could inter alia enable such applications.
Surely there can be no objection to that.
Professor Ashworth continued:
Apart from trimming the lists to the minimum, the interpretations of whatever restrictions are agreed in the issuing of export licences should be liberal. The presumption should be that the trade should proceed unless a sound argument is advanced for prohibition.
Are we sure that we do not tag on to the Americans from time to time? Professor Ashworth went on to say:
The industry fears that the possible deliberate or inadvertent confusion and/or combination of COCOA restrictions with the US 'extra-territoriality' laws will operate to the detriment of UK industry interests.
What is the Government's attitude? I realise, of course, that the Minister may be giving a thought-out reply in a letter to one of my colleagues. I should have thought that the right hon. Gentleman could have made some reference to this matter in his reply. It was obvious that it would come up in debate. I am aware also of the answer given in the other place to Lord Hatch.
I declare an interest in that I am a National Union of Railwaymen-sponsored Member of Parliament. I should like to follow what my hon. Friend the Member for Rotherham said about railway equipment. The Yugoslavs have signed a series of trade agreements with Argentina. Among the areas for planned trade and co-operation is electrification equipment for the Argentine railways. As these railways were originally built almost entirely with British capital and technology, there is a certain poignancy in this, although the decline of Britain's role in South America began long before 1982. I am not making too many assumptions about the conflict in the south Atlantic, although it had some effect on that decline.
The same goes for China. Many of the railways which we saw 15 years ago were British-made. Although the Chinese are developing a considerable railway industry, do we not have a part to play? To what extent were British Railways workshops consulted by the Government, as the Swindon works was, before its closure was announced, and other works would have been had there been any other Government? That is what the French and Germans do so differently.
Recently, the Siemens offshoot, KWU, agreed to build the second stage of the Atucha nuclear energy plant in Argentina with West German finance. That was not necessarily a project in which the United Kingdom could have been involved, but it showed how other countries are developing their trade with Latin America and China. We have heard that German participation in China is three times greater than British participation. How did that come about? It is heart-rending in view of the efforts that were made to establish a British presence in China when it opened up again in the late 1960s
Britain is now very much behind the rest of its European partners. The reason why Britain is very much behind has a great deal to do not only with soft loans but with the Overseas Projects Board. Following the comments of Mr. Roy Withers about Britain's willingness to give loans compared with that of our competitors, I asked the Minister in a written and an oral question about the Overseas Projects Board. What is the right hon. Gentleman's attitude towards that board? Are the implicit criticisms by Mr. Roy Withers justified? Is this a matter that we should examine? What is the board's role in relation to the Chinese?
One of the great universities of Europe, the university of Edinburgh, has a distinguished school of Chinese studies under Dr. Chinnery. As with many other departments, there is a danger that that department will be cut back and back. I know that the Minister for Trade is not an Education Minister, but I must ask him, given the special circumstances, the need to understand China and the need for certain British people to speak Chinese, what is the input of the Department of Trade and Industry into the question of university cuts? If we do not take this whole matter in the round and have an overall policy, Britain's trade with China, where our competitors are formidable and keen, will not get very far.

Mr. Martin Stevens: My right hon. Friend the Minister for Trade has not invited me to help him to draft his speech in reply to the debate, but there is no reason why I should wait to be asked. My right hon. Friend will tell the hon. Member for Rotherham (Mr. Crowther) that our increased diplomatic staff in China has the best record of Chinese speakers of any mission in Beijing. He will refer to the reintroduction of the consulate in Shanghai. He will mention that, as a result of our mission, the Chinese Deputy Premier authorised his statisticians to sit down with our mission staff to reconcile the argument whether our trade was in balance with China or whether, as the Chinese claimed, there was a trading balance in our favour of £300 million. My right hon. Friend will tell us that money is invested in a new and improved transmission system in Hong Kong for the BBC. The quality of reception of Chinese language broadcasts was one of the deficiencies that was most frequently drawn to our attention. Nothing could less expensively increase our influence in the People's Republic of China.
My right hon. Friend will speak of the intention to increase the number of Chinese students in Britain and will point to the scholarships offered by Lloyd's of London. He will point to the significant increase—from a low base, it is said—in trade with China so far during 1985. I had better not go on or my right hon. Friend will sit in silence at the end of the debate, with nothing left to say. I have made those points because it is not right for us to act and speak as though the Government have done nothing and do not care about China. That is not so.
I should like a slightly different approach to be taken. I should like greater flexibility, as other hon. Members have said, in the Government's attitude to any overseas market. We shall be said to be besotted with trade with China because the Select Committee has just returned. People who visit another country always return home thinking that our relationships with that country are the most important items on the international horizon. Our commercial relationships with China is one of the most significant factors on the commercial horizon. I should like the Government to adopt a market-oriented approach to China and other countries, rather than what might be called, in a business, a product-oriented approach.
If one is going into the business of selling, the old adage—the customer is always right—is correct. We must tackle the Chinese market on the basis of meeting and matching their desires and not simply saying, "We have a lieutenant-colonel as military attaché in Paris. It would be embarrassing to have an officer of higher rank in


Beijing." That stereotyped bureaucratic approach is the reverse of the approach that business people should adopt towards countries in which they want to sell their goods.
I should like the Government to consider new initiatives. One of the most important ways to enter the Chinese market is to offer to carry out a feasibility study. The United States will get the contract to build the new airport in the special economic zone adjacent to Hong Kong because it has spent $750,000 on a feasibility study. This is not a huge sum in political terms. Nevertheless, it is not a sum to be tossed lightly into the pot. Why are the Government not much more ready to provide the money for feasibility studies? Why do they not say, "If you get the contract, my dear fellow, we shall want our money back"? That does not seem to me to be a wasteful approach. Because of the way that they do business in China, not because of the way that we do business, it would help to bring in contracts that we should otherwise lose.
The hon. Member for Orkney and Shetland (Mr. Wallace)—I hope that I am not putting words into his mouth—said that the Chinese have the happy quality of not forgetting their friends. That is true. The only way for the British Government and British industry to approach the Chinese market is on the basis of a continuing relationship. My hon. Friend the Member for Honiton (Sir P. Emery) spoke of an eight or 10-year period. One ought not to look at this as quite such a brief flash in the pan. When we met him the deputy Premier referred to trade with China in the middle of the next century.

Sir Peter Emery: Indeed.

Mr. Stevens: What?

Sir Peter Emery: Indeed.

Mr. Stevens: I am so unused to the unstinted endorsement of my hon. Friend that I felt that I must have committed some blunder or social offence. I thank him for his endorsement. What was I saying?

Sir Peter Emery: Perhaps I may help my hon. Friend along the route of his argument. Reference was made to joint ventures. I suggested that even if joint ventures were for as short a period as eight or 10 years they were worth doing, but I endorse entirely my hon. Friend's point that they could continue for 30, 40 or 50 years. Trade with China will be very considerable. That was his line of argument when I so rudely interrupted him.

Mr. Stevens: Having tipped me off the rails, my hon. Friend has gracefully replaced me on the tracks. We asked the deputy Premier whether by the year 2050 the Chinese, having sucked in all the technological transfer that they so ardently desire from the West, would use their very low labour costs to "do a Japan" on us and flood western markets with their own products at a fraction of the price. He, like all the Chinese leaders that we met, was clearly aware of these anxieties and told us that, with a population of 1 billion, the overwhelming bulk of the goods that China produces in the next half century will be needed for the consumer requirements of the Chinese people. As a nation, China has a wretchedly low standard of living. Indeed, some of our Opposition colleagues were busily photographing their dwelling houses for use in their next general election addresses over the caption, "Thatcher's

Britain". Much progress needs to be made before the living standards of the Chinese people begin to match those which we in the west take for granted. Their leaders know this perfectly well. Ours was not a political mission. It was no part of our job to talk about the political future of China. However, one may speculate about whether the present political institutions will remain unchanged at the end of 50 or 70 years of free enterprise economics.
The Chinese are making enormous efforts to welcome people to China from all over the world. In 1984 there were 12 million tourists, of whom 11 million were people of Chinese origin who were returning to China to visit relatives and perhaps to provide help. The building of new hotels was proceeding apace. It was almost a question of hotels being erected the day before we arrived to provide appropriate accommodation for us. As a team, the Select Committee is austere. For its members a bowl of lentils is a feast. Toss in a turnip and it becomes a banquet. However, some of the hotels in which we stayed in Communist China offered a degree of luxury, service, elegance and cuisine that I have never experienced anywhere else in the world. That may also be an attraction for some of our fellow countrymen for whom the fleshpots hold out a greater inducement than they do for parliamentarians.
The Chinese were very explicit about the list of goods that they hope to sell in Britain and the list of goods that they hope to buy from us. They want to sell electrical machinery, motors, generators, hand tools, labour-intensive goods that we on the whole are gradually ceasing to produce, cotton piece goods, tea, bristles, rosin, textiles, tungsten, minerals, such as antimony, rice and canned vegetables. They are already buying coal mining equipment and know-how, aircraft and offshore oil expertise, but they want to buy 300 Mw and 600 Mw power stations, rubber goods—I cannot supply the details—and telecommunications goods. There is no reason why our Government cannot make sure, as no doubt they have already made sure, that the people in this country who deal in such goods know that these items are desired by China. However, several major British firms that are involved in the activities in which the Chinese are interested do not appear to have visited China, and their absence was sorrowfully commented upon to us by British business men who are already in China.
I said earlier that I should like the Government to be imaginative and flexible when responding to the special needs of the Chinese market, and I mentioned the funding of feasibility studies. One might also mention the emulation throughout the Pacific basin of the Japanese trading house system, which has been so successful and which has brought into those markets many firms that are too small to enter them on their own. The Chinese do not expect British business men to outsell their rivals on every point. We must be price competitive. They told us that the French are the most expensive but that we run them a very close second. We must offer soon to China some form of soft financial provision. We must also offer to transfer know-how and technology. We are very good at that. We are much more liberal than some of our competitors in those matters. From that it follows that the firms that are most likely to build up and sustain long-term relationships with our Chinese friends are those that are developing new technologies every year. There is nothing new in that as a system but it is new for the Chinese. They accept that we shall sell them last year's know-how while we are


ourselves perfecting next year's. There is a great deal of scope and long-term opportunity for those who grasp that point.
I should like to add a few words about the Chinese as people. They certainly think of us as people. They have not, over the centuries, been any too keen on foreigners, but now that circumstances compel them to open their doors to foreign business people they are beginning to compare us with the others who are entering their markets. We shall be comparing them with others in whose markets we are trying to sell.
The Chinese are extraordinarily tough in bargaining but extraordinarily agreeable as human beings. Their sense of humour is comparable to ours. Even in Beijing, which is the most Communist city, where the little blue suits, caps and macs are most frequently seen as the uniform of all men and women, the children are beautifully dressed and cared for. If sentiment were to be our only guide, there would be even more reasons for seeking to do business in China than those to which reference has been made in the debate.
The Select Committee, as has been kindly said by colleagues who were not members of it, worked very hard. I endorse everything that was said in the magisterial opening statement of our Chairman, my hon. Friend the Member for Hastings and Rye (Mr. Warren). I hope that the debate today will be heard and echoed among those who it is most important should respond actively and positively to what we are saying in the House this afternoon.

Several Hon. Members: rose—

Mr. Deputy Speaker (Sir Paul Dean): Order. The wind-up speeches are expected to begin at 6.20 pm. There are four hon. Members hoping to speak. I hope that they will co-operate so that they can all be called.

Mr. Barry Porter: If I cannot be brief, Mr. Deputy Speaker, I will be as rapid as possible. It is always a great pleasure, if not a challenge, to follow my hon. Friend the Member for Fulham (Mr. Stevens) whose erudition and depth of detail in research are an example to every hon. Member.
While I concede that there was an element of work in our trip to China, I rather enjoyed it, and the bowl of lentils and the odd turnip were not obvious to me by their presence. There were many 13-course banquets. If my hon. Friend casts his mind back to Canton, Shanghai and other delightful places, he might just recall the odd sea slug and other things that we enjoyed at that time.
On the general question of public expenditure, which is what the debate is supposed to be about, I might be regarded as a hawk rather than as a dove and as a dry rather than as a wet. I fully recognise the need, in the context of the Government's financial strategy, for restraint and for resistance to special pleading, except where there is a medium-term or long-term benefit to the economy from that public expenditure.
In the past we have all seen mountains of public money thrown at various industries here or abroad that were either dying on their feet or had gross over-capacity, and could not possibly ever again achieve a competitive position. Often that expenditure has been justified on social grounds, but in my judgment the reasoning has been

essentially short-term, without any hard thinking about the longer future. Surely it must be much more sensible to invest public money where there is a likelihood of success than to use money that we can ill-afford in trying desperately to stave off failure. I make those general points in relation to my own attitude only to indicate that I have taken considerable persuasion to reach the conclusion that the Government are spending too little in developing our trade with China.
In so far as anything is certain in this uncertain world, first, it seems to be true beyond peradventure that there is a huge market in China of which at present we have far too small a share. Secondly, that market is growing rapidly as the present Chinese Administration expands the economy. Thirdly, other countries have realised the potential and have decided to put their money where their mouths are and, as a result, are obtaining footholds in that market. It will be very difficult to supplant them once they are established.
Whether the companies involved are admitting any profit in the ventures undertaken up to now is a matter for conjecture, but certainly the companies and the Governments concerned have made a judgment that returns in one way or another will be there in the future. That is especially true of the Japanese but equally Of various European countries, even Denmark.
If we stand back—here I agree with the hon. Member for Rotherham (Mr. Crowther)—and take a lillywhite attitude to providing soft loans, cheap credit or whatever is the description, my judgment is that in 10 or 20 years—and I gather that the hon. Gentleman agrees with me—we shall bitterly regret it.
If in some other way British industry and trade could establish itself in China without Government assistance, I should be delighted, but, to coin a phrase, there is no alternative. If we take the long view, a partnership between British industry and the Government in China can and must be the only way. I think that the Government have come to recognise that. Their recent decision, on similar arguments in relation to Indonesia, as the Chairman of the Select Committee pointed out, underlines the point that the pragmatic approach to rapidly expanding markets is already Government policy.
Obviously, the detail of a soft loan policy is a matter for discussion. I hope that it would not take the form of general cheap credit. I hope that it would be on the basis of stringent examination of individual ventures, which should pass the test of ultimate profitability.
There are, of course, risks and difficulties, not merely economic but political as well. If I may take issue with my hon. Friend the Member for Fulham, I think that it is the responsibility not only of the Committee but of the House to try to make some judgment about the political future. The open-door policy has been of relatively short duration, certainly in the Chinese scale of thinking. When we inquired about China's population control policy, we were told that it had been decided to bring down the population from 1·8 billion to between 600 million and 700 million in the year 20400. We said, "Surely you mean 2040," and they said, "No, we mean 20400." That is the scale of thinking; that is the time scale in which they see the future of their country. Ten years of an open-door policy and of an expanding economy is like a flash of light.
I shall not enter the game of Chinese euphoria, but the open-door policy and the policy of general economic expansion have already run into some trouble, and there


is no point in British industry and the British Government not being aware of it. The scope and the pace of the reforms are already being re-examined.
Imports of refrigerators, cars, television sets and motor cycles are apparently, according to recent reports, clogging the seaports. Railways are so seriously congested that there are grave coal and steel shortages. One factory in four throughout China is idle because of electricity cuts. It seems clear that there will not be an easy progression of 7 per cent. a year of economic growth. Even an old horse like me is willing to urge the Government to spend more money supporting British industry and trade because the Chinese leaders accept that there are difficulties. In a conversation with Trinidad's Prime Minister, Deng Xiaoping said that, although there were difficulties,
I believe that our policy will succeed. If one method proves ineffective, another will be used.
I was sceptical about whether Chinese political society will be such in the next 10 years that people can expect a return on capital. Having met people in China, I believe that there is such a prospect, in spite of the difficulties. It would be entirely wrong not to expect difficulties—there could be difficulties for a considerable time. We must bear it in mind that a society that has already turned 180 deg in the past 10 years could quite possibly turn another 180 deg in the next 10 years.
Even the special economic zones are not terribly successful at the moment. We went to Shenzhen, which is now described as an experiment, although it was not so described previously. Only one third of production is being exported, and investment has been terribly disappointing. Moreover, the area is notorious for its currency black market and smugglers. It sounds just like the West, doesn't it? Whatever the difficulties, however, there is enormous potential. We should not think that British industry and trade will be transformed overnight, because it will not be. However, given the circumstances that I and others have outlined, the Government have a duty and a responsibility to do something quickly.
When I look at the Estimates, which are supposed to be the basis of this debate, I see that we are not spending much, not merely on China, but on anything. The sums involved seem, even to a wicked old monetarist like me, rather like back pocket money. I can think of ridiculous things on which we spend money, yet cases such as this deserve money but do not get it. If I am asked to pick a figure out of the air, I would say double it for starters and see how we get on.

Dr. Norman A. Godman: I am not a member of the Select Committee and I should like to offer my compliments to the Chairman and his colleagues on producing a useful report with sensible recommendations. I hope that the Government will examine it most carefully.
I should like there to be a growth in our trade and friendship with China but I cannot foresee the day when lots of Chinese fishermen fish for salmon on the Tay. Of course I should like more Scotch whisky to be exported to China. I should like other indigenous products such as salmon and knitwear to be exported there, but I shall confine myself to the offshore oil and construction

industry. I should like to hear what the Minister has to say about the prospects for that industry in the growing Chinese market.
The offshore oil and gas industry is a significant element in the Scottish economy, and hence in the United Kingdom economy. The industry will have to continue to change rapidly if it is to remain the wealth earner and employment generator that it is at the moment. Scores of thousands of people in Scotland are employed in the industry and the emphasis will have to switch to export-led demand.
Our yards are now among the best in Europe. I include in that Scott Lithgow, which is in my constituency, UIE, which is on the Clyde, and Methil, which is in the east of Scotland. We now have the experience and knowledge to seek exports to China, and we need as much help as we can get from the Government. I appreciate the work being done by the Minister of State, Department of Energy, the right hon. Member for Kincardine and Deeside (Mr. Buchanan-Smith), who has made at least one journey to China in an attempt to increase exports.
Because of developments in our offshore industry, we must develop our exports. Scott Lithgow and Ferguson's in my constituency are actively involved. Ferguson's has just won a remarkable export order for two offshore supply vessels for Canada to work in the Beaufort field. The management and work force of Scott Lithgow are at one in their endeavour further to develop work in the design and construction of semi-submersible rigs. What are the prospects for such structures in the Chinese offshore industry?
As Scott Lithgow is a front runner in that technically advanced field, it is essential that it is given all possible aid to sell its products in China and elsewhere. The managing director, Mr. Fudge, who is perhaps the most inappropriately named manager that I have met—there is nothing soft-centred about this laddie—and Mr. Duncan McNeil, the convenor of the shop stewards, are working in the closest co-operation further to develop the reputation of the company.
What are the Government doing to encourage the export of such structures, not the intellectual property which goes with the design and construction of them? It is an important industry to Scotland and hence to the United Kingdom. It is essential that that export market is developed in the next 20 years.

Mr. Michael Morris: I too am not a member of the Select Committee and would like to compliment the Committee on its report, not least because it is succinct and makes clear recommendations. I shall not repeat what I said on 5 July.
Since I have been a Member of Parliament, we have had major export drives to the Soviet Union, when Lord Wilson of Rievaulx was Prime Minister, to Iran and to Nigeria. All three of those have gone wrong, but for different reasons.
My plea to my right hon. Friend, therefore, is that we treat trade with China as a topic on its own. We should give it its own budget. We should analyse the work that is put into that trade and what we get out of it. Nigeria went foul on us and every other export market suffered. If something goes wrong with the China trade other export markets will suffer. If we get our act together—the report helped to pave the way—I hope that whichever


Prime Minister and Government are in power in five years' time will see the success that follows from a concentration of resources and good marketing and agree to make resources available for other world markets.
I know Singapore reasonably well. We have worked closely and successfully with the Chinese there. The same applies to Hong Kong. No one has as good an entreé to Hong Kong as we have. We should be able to do something there.
Paragraphs 58 and 59 of the report say a great deal about soft loans. It is not surprising that we have difficulty competing with Japan, Belgium, the Netherlands, Denmark, Germany, Austria, France, Sweden and Italy. They all give soft loans and we do not. I am a member of the Public Accounts Committee. Problems of overexpenditure and funding come before that Committee. I should like to see a report from the Comptroller and Auditor General illustrating the competition that we face as a result of other countries offering soft loans. We must have a significant soft loan budget for China. That budget must be allowed to be rolled over. The Public Accounts Committee recommended that the defence budget be rolled over. I recommend that a soft loan budget be rolled over.
We must be able to make decisions reasonably quickly. I am not asking for decisions within one, four or eight weeks—they should not take more than eight weeks—but at the moment we go on, month in month out, waiting for decisions. My right hon. Friend will not want me to mention a certain dam.

The Minister for Trade (Mr. Paul Channon): My hon. Friend will be pleased to know that good news is on the way.

Mr. Morris: That is even better. Soft loans are the key to improved trade.
The Export Credits Guarantee Department is important. The Public Accounts Committee received written evidence from Northern Engineering Industries plc. I shall quote one sentence:
The crucial requirement for success is that the supplier should be internationally competitive in cost terms to exactly the same extent
as his competitors. Northern Engineering Industries plc said that it would not have obtained £500 million of business if it had not had support from ECGD. That was good hard evidence. It is rubbish when Mr. Byatt and his colleagues say in their report that there is no evidence of a follow-on employment benefit.
I am sorry to have to mention the Bosporus, but I have a letter from a friend in Bedford who says that as a result of failing to secure the second Bosporus bridge and the Saudi airport terminal contracts, 50 redundancies are being made at Redpath Dorman Long. The key point is that that company is to be wound up and the staff and expertise in that hitherto British-dominated specialty in world terms disbanded. We cannot afford such things.
My hon. Friend the Under-Secretary of State for Trade and Industry told me in an Adjournment debate that each 1 per cent. trade gain or loss represented 250,000 jobs. That is a sign of how important our export trade is. One GEC major contracting subsidiary had 7,000 suppliers. The majority of those suppliers are in the black country, the north-west and the north-east. That is why capital goods companies are vital to this country's future prosperity.
My right hon. Friend must respond to the report within 60 days. The recess is ahead of us. I am sorry to make him work ever harder than he normally does during the recess, but I should like to see the response in a form different from that which is normally made to a Select Committee report. I should like to see a marketing plan for exporting to China as the response to this imaginative document.

Mr. Mike Woodcock: As the Committee's final contributor this afternoon. I realise that, having only five minutes in which to speak. I must be brief.
China is committed to fast economic growth and peace. It is presently undergoing a controlled revolution which will be more far-reaching in its effects than the cultural revolution. Whilst China remains a Socialist country—if Socialism means the state ownership of the means of production, distribution arid exchange—it is also a country where collectivism, central control and doctrinal Communism are being rapidly replaced by individual responsibility, the profit motive and reward for effort.
Capitalist principles are being applied and the economy is taking off. People are becoming more prosperous, and that heralds tremendous opportunities for British exporters. We have already heard about many of those opportunities—raw material development, transport, commercial services, tourism and consumer goods. They all provide opportunities for British exporters.
Whilst I was in China, I kept an eye open for export opportunities for people in my constituency. They were many and varied. Companies in my constituency have a great deal of expertise to offer on oil exploration. We can offer refining equipment—even second-hand refining equipment. We have a redundant refinery which could easily be sold to the Chinese. We can assist with lead additives. The Chinese Government have not been as foolish as our Government in seeking to take lead out of petrol. The Associated Octel Company has already made plans to attend the trade fair in Peking. It hopes to do substantial business there.
Nuclear enrichment offers opportunities. China has a booming nuclear industry and nuclear power generation requires enrichment. We have an enrichment facility. We have already signed contracts with the Soviet Union, and I am sure that similar contracts could be signed with China.
There are opportunities for chemicals and fertilisers. Chinese agriculture is booming. There is an enormous need for chemicals and fertilisers and for the plant to manufacture them.
We have a great deal of coal expertise to offer. China has a great deal of coal to get out of the ground.
Even in an industry as outdated as water transport, we have something to offer. The Chinese need to develop water transport to move raw materials to the industrial centres.
Those are some of the opportunities available to firms in my constituency. Those opportunities are repeated hundreds of times across the country. If we could ensure that everyone who goes to China returns to preach the message of the opportunities available, British industry would see that they are tremendous.
We have heard a great deal about the barriers to trade in China—the distance, the difficulty of the market, the need for long-term commitment. the high cost of offices


and hotels, the poor telecommunications, the Government's unwillingness to provide soft loans—although I note what my right hon. Friend has said—the difficulties faced by commercial staff in our industries and the COCOM restrictions. Despite all that, business could do a great deal to capitalise on the available opportunities.
Some large companies are doing well. Members of the 48 club are doing well. All companies that wish to export to China must recognise that country's different cultures and values. Those companies must be prepared to go there and negotiate locally over a long time scale and to maintain a local presence. They must be prepared to take advantage of the unique joint venture arrangements in China and of the special economic zones. If they do that, they will soon reaise that China can be an excellent base for exports to all the countries in the far east.
Only three hours ago I talked to Gerry Boxhall, the chief executive of Vickers Defence Systems—a company that has concluded many successful deals in China—and he is flying to Peking on Saturday to talk about a possible joint venture. I asked him what advice he would give to British exporters, and he said that four things are essential. First, take time to ensure that one deals with the right man. It is easy to choose the wrong man and to spend a long time going down the wrong tunnel. Secondly, find out what the Chinese want. A company should not enter China with its perspective of what the Chinese want; it should listen to them. Thirdly, as has already been said, send the top man. The Chinese will not do business with anyone other than the top man. Fourthly, beware of "Mr. Fixits"—the many agents who purport to be a good link between Britain and China.
What can the Government do to help? We have already heard a plea for increased staff in the commercial section of our embassy. It is absurd to have only between five and seven commercial staff in Peking to service a country' that has 25 per cent. of the world's population. It is also absurd to have only three British members of staff in Shanghai to service an area that is bigger than the EEC. The Government should also press to liberalise COCOM rules. I say no more about that, because it has already been mentioned several times. The Government must provide soft loans to China. In that respect, we welcome what the Minister said. Perhaps through our embassy, the Government could do something to provide collective office facilities in Peking from which small business men can work without having to pay the high costs of offices there.
I end with a warning. China needs technology, and we need profitable exports. We have the basis of trade to our mutual advantage. But some—perhaps the cynics—may say that the Chinese want cheap, or even free, technology transfer, capital goods at uneconomic prices and soft loans on extended terms, which almost mean payment out of profits. It could be argued that, if we are not careful, we shall export technology on terms that destroy jobs in the United Kingdom for little commercial gain. United Kingdom firms may be lured into uneconomic business, believing that a foot in the door will lead to profits later. However, that door may be closed when the transfer of technology is completed.
My visit to a Shanghai factory, where workers were earning less than £30 a month producing shirts with Van Heusen labels, gave me a vivid insight into the possible

effects of technology transfer on British jobs. I offer those thoughts not as a deterrent, but as a warning to companies to ensure that the business they do in China is profitable and advantageous to them and to United Kingdom interests.
In the long term, Britain can compete with China only if it is ahead in technology and if it has better management and marketing skills. Let us look to China with optimism, but with realism.

Mr. Bryan Gould: I, too, congratulate the hon. Member for Hastings and Rye (Mr. Warren) on his report and on the speech with which he opened the debate. It has been universally agreed in the debate that the report is valuable and has been an extremely useful spur to a greater and proper recognition of the immense opportunities offered by the Chinese market. Many contributors to the debate bore witness to the immensity of that market, to the prospects for growth and to the political changes, which mean that there is a new readiness to open trade doors.
In 1978, I had the good fortune to visit China at an interesting moment in its history. The cultural revolution had just ended, and Deng Xiaoping had not yet properly asserted himself, but there were extremely high hopes about the prospects for trade with China. It must be said that, almost immediately, those hopes were dashed. For about three years after 1979, trade with China suffered severely. The Select Committee report makes clear that Britain now enjoys only 1 per cent. of the Chinese market for imports.
That is worrying, because Britain of all countries should have the inside lane. We have a long involvement with Hong Kong which, in turn, gives us a privileged commercial entree. In the wake of the political agreement to settle the future of Hong Kong, we bask in the warmth of a new glow of friendship and approval from Peking. It is entirely appropriate that we should now try to reverse what is, in all conscience, a disappointing trade performance so far. I am sorry to disturb the welcome, all-party consensus that has dominated the debate, but it must be said that that disappointing performance is of a piece with our general trade performance. My hon. Friend the Member for Rotherham (Mr. Crowther) and others have said that. from 1983 onwards, we have had a deficit in our trade in manufactured goods that is growing rapidly and disastrously.
The report makes clear that British industry could do much for itself. I am sure that industry' will read the report with interest, and will look forward to receiving the handbook which, interestingly and innovatively, the Select Committee intends to produce.
However, the debate is primarily about the Government's responsibility for promoting exports to and trade with China. I am in a slight difficulty here, because whenever I tax the Minister with the fact that our trade in manufactured goods has declined, he usually replies, "What are you worried about? We are balancing our trade. We could not continue to produce goods and rack up great surpluses. In any case, the Government can do nothing about the loss of trade in manufactured goods."
The Government are being inconsistent. On the one hand, they argue that the decline in our trade has been the inevitable consequence of North sea oil and other factors. On the other hand, the Minister and others rightly lay


considerable emphasis on the need to improve competitiveness and productivity. What is the point of doing that if no improvement in our trading performance is possible? However, if it is possible, by improving competitiveness and productivity, to improve our trading performance, those are matters for which the Government must take some responsibility.
On export support and promotion, the Government's position is sometimes similarly confused. On the one hand, understandably, and with the support of most hon. Members, the Government express outrage at an episode such as the loss of the Bosporus bridge contract. On the other hand, the Government, wedded strongly to their free market ideology and their dislike of subsidy and public spending, are tempted by the thought that they should stand aloof from efforts to support our exporters in those difficult markets. From time to time, there is a worrying element of what one could call unilateral disarmament in the Government's position.
The Select Committee has served a useful purpose in drawing attention to the undeniable fact that such a policy will get us nowhere in our trade with China. For the Chinese, soft loans and extended credit terms are essential. They are an intrinsic part of the deal, on the basis of which the Chinese will decide whether to give business to us or to our competitors. With the Select Committee, I welcome the belated step the Government have announced that soft loans will be extended to China. However, we must remember that that step will be taken within the present limits of the aid and trade provision. Therefore, it is a diversion of resources rather than an increase. Aid will be provided on existing terms, which in many cases will not match those offered by our competitors. As the hon. Member for Hastings and Rye said, there seems to be a lack of urgency in introducing the new regime. I urge the Minister to make clear that he sees the urgency of what is required and that he will move rapidly to make sure that our exporters are not at a disadvantage in this important matter.
The problem for the Government is that some years ago they commissioned the Byatt report, which was produced from within Whitehall. Although the report was published, it was never debated. It purported to show that there were serious lapses in the reasoning to support export promotion. Its conclusion was to the effect that such promotion was undesirable and probably unnecessary and impracticable.
Understandably, that report created anxiety and led to some uproar among the business community. That must have been increased by the signs that the Byatt report philosophy had taken root to some extent. For example, the Chief Secretary to the Treasury, in a speech made over a year ago to the association of engineering employers in the west midlands, referred to the report in approving terms.
However, what seems acceptable to civil servants and Ministers does not necessarily commend itself to firms engaged in the actual business of trying to obtain such orders. Not surprisingly, industry has reacted strongly, sharply and critically to the Byatt report. The Government's own Overseas Projects Board published its fourth report in April this year. It said that the Byatt report was "seriously flawed". It continued:
recently we have become very concerned at the Government's apparent ambivalence as reflected in delays in handling ATP cases, some curtailment of the ECGD's facilities and pressure on

ECGD to adopt a more cautious attitude to 'country risk' than that taken by many of the UK's competitors. These developments leave a feeling that the Government may not fully understand industry's needs and serve to undermine confidence".
That body was set up by the Government and consists of leading industrialists and financiers, so it is not normally critical of the Government. Therefore, I trust that the Government will take some notice of what it had to say.

Mr. Wells: What does the hon. Gentleman understand by an increase in soft loans and the place in the budget from which it comes? I understand that the Labour party believes that the ODA's budget should be expanded and that the ATP should not take an increased share of that budget. I understand that his proposal, and what he is approving, is an expansion of the ATP, but without expanding the ODA budget. In that case, we shall be in serious difficulty in other sectors of export support, as 70 per cent. of the ODA's bilateral budget goes to the acquisition of British goods and products.

Mr. Gould: The hon. Gentleman is right to draw a distinction between the ODA and the ATP, but I assure him that, while we would wish to see, and have argued persistently and strongly for, an expansion of the ODA budget, we are entirely in support of industry and many of the bodies that I am about to cite when we say that an increase in the ATP is also required. I hope that there will be no misunderstanding on that.
After the Overseas Projects Board report, the next blow was struck by the National Economic Development Office report, which was a response to the Chancellor's challenge to produce some evidence of follow on. That report is a full and detailed rebuttal of the reasoning underlined by the Byatt report. It gives in more than adequate detail, chapter and verse, example after example, of follow on business being obtained. For example, Balfour Beatty in Indonesia, with the aid of £15 million worth of provision, has secured over the past 12 years £317 million worth of business That point is reinforced by the Select Committee when it emphasises the need for British firms not just to fly in and out of the market but to stay in it and expect to develop business over a long time.
The next response from industry was the formation into a group of 13 major British contractors employing 394,000 people, and underpinning thousands of sub-contracting firms and all the jobs that depend on that. The group has been brought into being to make the case for this form of export support on the ground that it is the essential element in obtaining an important part of the business on which they depend.
What is now needed—here I am happy to echo points already made—is for the Overseas Projects Board, the major British exporters and everybody else who has looked at the subject to agree on a substantial increase in ATP. We have to get away from the idea that we are talking about subsidy when we are talking about an essential Government effort to match what other Governments are doing to support their industry. The Japanese have an ATP budget of 40 times ours. Even the French have a provision that is 10 times as great as ours. In 1984–85, it is estimated that ATP of £59 million produced orders of £222 million. That is good value for money in anybody's terms.
As the hon. Member for Northampton, South (Mr. Morris) said, it is nonsense that accounting rules prevent us from spending money that is available under this


provision. We need a roll-over provision because I understand that, over recent years, £16 million worth of this provision has not been spent, and that is nonsense.
There is also the point, made by Conservative Members, that we need to initiate the provision of help. Too often, we send our exporters into battle inadequately armed. They go in and get some interest in a contract, but then they have to come back to ask whether they can match the terms offered by foreign competitors. That gives a bad impression to start with, and inevitably leads to delay and catching up because we are lagging behind.
Something has to be done about procedural delays, as is universally agreed. There are too many bodies in Whitehall tossing ideas backwards and forwards. We had the disastrous experience of the Bosporus bridge contract.
We looked to be in danger of repeating that experience with the Samanala Wewa hydro-electric dam in Sri Lanka. I know that the Sri Lankans are keen that British firms get that contract, but there is a danger that we shall lose it. I was delighted to hear the Minister's cryptic intervention. I hope that he has some good news for us and that that good news has not come too late. It is running things rather tight to have left that project to simmer away in Whitehall for so long. It would be useful if the Minister could tell us what is happening to the shake up of the export promotion effort, which was written up in one of the Sunday papers about four weeks ago and on which we were promised results by the end of the month, although these have yet to come. Is there more good news in the pipeline?
The ECGD has faced difficult trading conditions, and unnecessary political uncertainty engendered by the process of the Mathews report and the internal departmental report, and so on. Industry is clear about the fact that we need more resources for the ECGD, particularly for its ability to cover things such as tender for contract cover.
As the Select Committee points out forcefully, there is the problem of the reduction in real terms of the British Overseas Trade Board's budget. That is a strong example of penny wise, pound foolish and it calls into question the Government's seriousness of purpose when they are willing to cut the budget of the major body designed to encourage British exports.
As a former second secretary, commercial, in our embassy in Brussels, I have considerable sympathy with the Select Committee's strictures about the staffing of our embassy in Peking. Five to seven commercial staff is simply not good enough. Three full-time staff in Shanghai is ridiculous for an area as great as the EEC, as hon. Members tonight and the Select Committee have pointed out
There are other matters. One could go on with a long list, starting with the BBC external services and Chinese students coming to Britain—all important projects through which we could engender the relationship with China that would make the task of our exporters so much easier. Unfortunately, yet again the Government are cutting back the budgets for those projects, and doing so quite unrealistically.
I have only a minute to deal with the important and vexed question of COCOM. We had an excellent debate in Committee yesterday on this subject. The Minister for Trade was kind enough to say that he recognised the force of the argument that the rules of the COCOM arrangement

should be substantially relaxed in the case of China, something for which my hon. Friend the Member for Linlithgow (Mr. Dalyell) argued forcefully. I am glad that he is aware of that point, and is negotiating even now to secure that relaxation. The problem of trade with China consists of all those matters, and the underlying lack of competitiveness of British industry. As the Select Committee said, the Chinese will buy from us only if we are competitive.
I shall conclude on a tendentious but accurate point. Despite ministerial rhetoric, we have lost competitiveness. Every index of competitiveness shows that we have lost ground during the past five years. Day by day the problem is exacerbated by the Treasury-dominated Government, who are using high interest rates to force up the value of the pound. This is destroying our competitive position against our most dangerous rivals. Until the Minister and his colleagues get to grips with the Treasury and persuade it that trade matters are of immense importance to our economic future, we cannot take seriously the Government's intentions for the trading opportunities with China.
If the Select Committee has done even a little to remind the Government of the immense importance and opportunities of what beckons us in China, it will have done a good job.

The Minister for Trade (Mr. Paul Channon): I intend to base my remarks wholly on the draft given me by my hon. Friend the Member for Fulham (Mr. Stevens). In future I shall use him exclusively as my speech writer. I agree with all hon. Members who have said what a splendid report the Select Committee has produced. The Government congratulate my hon. Friend the Member for Hastings and Rye (Mr. Warren) and his colleagues on their impressive report.
The hon. Member for Dagenham (Mr. Gould) introduced general points, and I am tempted to spend time replying to him, but that would be unfair because I want to deal with China. Nevertheless, first I shall reply to some of those generalities. My hon. Friend the Member for Northampton, South (Mr. Morris) has been the most fervent advocate of the Samanala Wewa project. The Government are delighted to offer ATP—aid and trade provision—for that project and I hope that it will be a success. We are delighted to initiate ATP in suitable cases, and there is no inhibition about that. We shall certainly try to reduce any delays that may exist, and we are constantly taking steps to improve the workings of ATP. Indeed, as the hon. Member for Dagenham rightly pointed out. ATP has been underspent in recent years. It will not be underspent significantly this year, and we have taken steps to ensure that it will not be underspent significantly in future.
I return to the specific points about China. We have had the report only since Monday, and I hoped to reply to it all this afternoon, which would be a record. However, I am slightly put off by my hon. Friend the Member for Northampton, South, who suggested that I should reply to it in a different form later this summer. Nevertheless, I can say something about some of the recommendations this afternoon. We shall consider the report carefully and reply in the normal way when we have the time to consider it more fully. If I do not have time to answer all the points raised this afternoon, I shall write to hon. Members.
The debate and the report are well timed. Large numbers of hon. Members are well aware of the opportunity for expanding our trade with China, which is a view widely shared outside the House. Why has China become such an important topic in terms of trade recently? First, we have entered a new phase in our political relations. The United Kingdom-China joint declaration on Hong Kong was signed during the visit of my right hon. Friend the Prime Minister to Peking in December, ratified on 27 May, and followed by the welcome visit to Britain last month by the Chinese premier, His Excellency Mr. Zhao Ziyang. It has been announced that Her Majesty the Queen will make a state visit to China next year. During Premier Zhao's visit, both Governments reaffirmed their wish to see United Kingdom-China co-operation develop even faster in the years ahead.
The second main reason for renewed interest in trade with China is that the development of China's economy during the next two decades offers real opportunities for many British companies, as the Select Committee pointed out. Perhaps the greatest opportunities are in China's economic priority sectors of energy, transport, telecommunications and industrial modernisation, in which we have great expertise. There are also opportunities for co-operation in areas such as agriculture, health care, electronics, information technology, defence sales and transport. British aircraft companies have had considerable success recently. China recently signed contracts for the delivery of 10 BAe146 aircraft worth some $150 million, and eight Short Brothers SD360 aircraft.
In energy, our coal mining industry has a long history of co-operation with China. Premier Zhao visited Anderson Strathclyde, one of our major suppliers of coal mining equipment. I hope that the hon. Member for Greenock and Port Glasgow (Dr. Godman) feels that Scotland got a look in on that visit. Negotiations on the Guangdong nuclear project are now at an advanced stage. I hope that GEC will shortly receive the turbine generator contract when outstanding issues have been resolved.
In telecommunications, Cable and Wireless has entered into joint ventures to develop the telecommunications system in south China, and is holding discussions about co-operation in other parts of China. Other major projects are under negotiation—for example, in steel and nonferrous metals.
There are also good prospects for growth in invisibles, which were not mentioned during the debate. The British Invisible Exports Council held an extremely good seminar in Peking, and the chairman of Lloyd's recently led a successful mission to China with the aim of further developing Britain's large reinsurance business with China.
In recommendation 5 the Select Committee suggests that we should ensure that information about tenders is disseminated effectively, and we shall certainly do our best to ensure that. Incidentally, I have received no complaints about that. For the world aid section, which is an important part of the World Bank's programme of lending to China, we shall continue to ensure that details are available as early as possible. Although the present position is not wholly satisfactory, as hon. Members pointed out, there are good prospects for the future.
There have been good exchange visits at Government level. The visit of my noble Friend Lord Young, Minister without Portfolio, who led a high level business mission earlier this year, opened up an enormous number of

valuable opportunities. Later this year my right hon. Friend the Minister of Agriculture, Fisheries and Food will also visit China. We have had visits from the Chinese Ministers of Agriculture and of the Environment. A great deal has been going on and the momentum must be kept up.
As the Committee stressed, China is not an easy market. It remains a state trading country where doing business can be expensive, difficult and slow. The language and cultural barriers need to be overcome. Reliable market information is hard to obtain, and it is not always easy to identify potential Chinese customers. The present pace of change has added to the difficulties.
It is essential for business men, especially newcomers to the market, to understand the potential problems and to seek advice on how to overcome them. They will need patience and perseverance, and to be competitive. As my hon. Friend the Member for Honiton (Sir P. Emery) and others pointed out, business with China can take a variety of forms and the transfer of technology is extremely important. We have a much better record than the Japanese and nearly every other country on that. Wherever I go—I have just returned from the far east—it is pointed out that the United Kingdom is much better at transferring technology than Japan. When hon. Members go abroad, I hope that they will point that out, because it is the truth.
Joint venture agreements are a further promising area. Some companies selling to China, especially medium-sized and smaller ones, would do well to form links with one of the large international trading companies with offices in China, or to work with a Hong Kong partner experienced in trade with China.
The official export services are one important source of advice and help. I think that the Committee saw our publication entitled "Selling to China". We shall await with great interest the Committee's own publication.
In recommendation 7, the Committee made a plea for greater resources to be devoted generally to promoting exports. There are already the export services of the BOTB, the ECGD, the ATP and the trade promotion work of British diplomatic posts abroad. Up to 75 per cent. of the users of BOTB services—the figure may be even a little higher—are small firms with fewer than 200 employees. Helping large companies to win orders benefits many smaller companies through sub-contracts and equipment orders.
I understand the Committee's desire to see an increase in the funds available to the BOTB. I note that that seems to be the view of the House. The funds have been held constant in cash terms. The House will know that the resources available to the Department of Trade and Industry are, unfortunately, finite, but my right hon. Friend the Secretary of State will examine the Committee's recommendation carefully when considering other conflicting claims on his budget.
When we have debates on other issues such as research and development, compelling demands are made, sometimes by the same hon. Members, for an increase in that budget. Others say that Government expenditure should be held steady or reduced. However, that is a very important matter, and my right hon. Friend will pay the closest attention to the views of the House.
The hon. Member for Rotherham (Mr. Crowther) was, uncharacteristically, a little unfair when he said that the Government were not interested in China, or words to that effect. In fact, BOTB spending last year in support of


exports to China was over £1 million, more per pound of exports than was spent on any other market in the world. Expenditure this year will, again, be at a high level. BOTB expects to support British groups at 12 international exhibitions. I shall not read out the whole list, but I can give it to those hon. Members who are interested.
The board also expects to support 11 outward and inward missions. It will pay a grant in aid to the Sino-British Trade Council. We are pleased that Sir Eric Sharp has become the new president. I am sure that everyone will wish to thank Sir Peter Matthews for his work as president of the council for a very long time.
Increased resources for the BOTB in China were mentioned, but we must look at the priorities elsewhere. The Committee was keen on western Europe and the countries of the Association of the South Eastern Asian Nations. We must consider whether it would be better to spend more money in western Europe, the United States, China or elsewhere. There are good cases for all of them.
Diplomatic posts are mainly a matter for my right hon. and learned Friend the Foreign Secretary. When I was in China not long ago, we did not have a consulate general in Shanghai, but we do now. That is a major step forward at a time when other posts are having to be closed. The Committee was informed in evidence given by the permanent under-secretary to the Foreign and Commonwealth Office that the staff in Peking has been increased by adding a new first secretary responsible for energy matters.
The commercial staffing in China numbers 10. That is larger than that of any of our European rivals. Only Japan and France have more. Therefore, our number is higher than that of the United States of America, West Germany, Sweden and Italy and is not out of line with that of many others. However, again, that is a matter of priorities. Many requests come to the Foreign Office for posts in places such as Miami. There is a strong case for reopening there, for the important market in South America referred to by some hon. Members. We are asked to put more resources there or in other places. My right hon. and learned Friend the Foreign Secretary will study the points made in the debate about staffing.
Credit terms have been mentioned on many occasions. China is eligible for the full range of credit facilities from the ECGD. There is no shortage of cover. I do not think that firms should be deterred on that account. Until recently China has not been eligible for support under the ATP. However, the Government have decided that in future ATP support will be available for China. That is a considerable step forward. At present that is only on the usual ATP terms of a mixture of grants with export credits, and the funds available are limited.
Therefore, it is right that we should discuss with the financial community the mechanisms that might be devised for providing soft loans. That will be equally true in Indonesia as well as China, as was announced a little while ago. My hon. Friends the Members for Hertford and Stortford (Mr. Wells) and for Hastings and Rye dealt with that matter. We shall proceed speedily with those talks. I cannot say what the conclusions will be today. The announcement was made only on 9 July, but when the House returns in the autumn I hope that my hon. Friend

the Member for Hastings and Rye will table a question on the first day. I know that if he does not receive a satisfactory answer he will create havoc.
Resources will still be limited and most of our exports to China will continue to be paid for either in cash or on normal credit terms. Reference was made to increasing the ATP budget. I note the views of the House about that. They will be considered carefully by my right hon. Friends in the public expenditure round.
Technical co-operation has also been mentioned. Among other things, the ODA contributes to the cost of consultancies. The hon. Member for Linlithgow (Mr. Dalyell) talked about British consultants. We hope that that contribution will lead to commercial benefit for Britain. The ODA also contributes to the costs of Chinese students coming to Britain for further education. The number has trebled from a low base, as my hon. Friend the Member for Fulham said. The Committee recommended that ODA funding should be increased, and that recommendation will be considered carefully. Many companies make arrangements to bring Chinese people to Britain for training, and I hope that other companies will follow their example.
The COCOM countries have already agreed to apply controls to China more flexibly than to the Soviet bloc countries. On a British initiative, they have agreed to speed up the processing of applications for China. The possibility of further relaxations is under consideration. Britain is playing a leading role in the discussions. We have made clear to our COCOM partners the British view, which I think is widely shared, that there are several areas of high technology in which the West can contribute to China's modernisation without damage to our other interests. There will be further discussions in September, and the views of the House will be useful to us.
No applications have been made in regard to Dalian airport. I cannot see any reason why civil radar should be any problem under the COCOM rules.
The hon. Member for Greenock and Port Glasgow referred to offshore oil and gas. The prospects, which are considerable, depend to some extent on how soon oil is found in commercial amounts. British Petroleum is playing a major part in the search. Last year the Government supported a major oil seminar in Peking, Shanghai and Canton, arranged by the Sino-British Trade Council. My right hon. Friend the Secretary of State for Energy went there. He takes a keen interest in the subject.
Railways have been mentioned by several hon. Members. One company—Strachan and Henshaw—recently won a substantial order for coal unloading equipment. We are in touch with the companies connected with the industry and railway electrification. There may be opportunities in the not-too-distant-future in underground railways or metros.
The hon. Members for Greenock and Port Glasgow and for Orkney and Shetland (Mr. Wallace) will be interested to remember that it was owing to British persuasion that the China National Offshore Oil Corporation set up its European office in Britain despite strong competition from other parts of Europe.
The Overseas Projects Board is a valuable source of advice to me and my colleagues. We agree on the need to use the ATP flexibly and efficiently. The recent measures that have been taken will, I hope, help greatly in that respect.
The hon. Member for Dagenham (Mr. Gould) referred to the Byatt report. It provided an interesting input to thinking on this important topic. It has not met with unanimous support. It never represented Government policy. That is shown by the fact that we are already taking steps to improve the ATP. With regard to soft loans for China, we are the only country that does not have them.
There is a host of ways in which we can increase our trade with China, which I know is the wish of the whole House. Our exports to China are at a low level, but they have increased considerably in the past few years. A few years ago they were worth about £110 million. I remember going to Cyprus when we exported more there than we did to China. The hon. Member for Dagenham may criticise us for many things, but when he is talking about trade with China he is on a weak wicket. Trade with China has gone up considerably. Even taking the freakish figures for last year, which included some erratic exports, it has more than doubled. Prospects for expansion of trade are good.
The Committee has done a useful job and we shall be answering its report fully in the usual way. We are aware of the importance of exports to China and we shall do our best to expand trade. I know that the House will be vigilant to ensure that the Government take the necessary steps towards that end. But, above all, it will be for business to seize the initiative. I am sure that industry will be grateful that we have had this debate today.

It being Seven o'clock, the Question was deferred, pursuant to Standing Order No. 19 (Consideration of Estimates) and to order [4 July].

Orders of the Day — Insolvency Bill [Lords]

As amended (in the Standing Committee), considered.

New Clause 5

AUTHORISATION OF MEMBERS OF RECOGNISED PROFESSIONAL BODIES

'(1) A member of a recognised professional body is authorised to act as an insolvency practitioner if he is permitted so to act by or under the rules of that body.

(2) The Secretary of State may by order declare a body which appears to him to fall within subsection (3) below to be a recognised professional body for purposes of this section; and any such order may be revoked by a further order if it appears to the Secretary of State that the body no longer falls within that subsection.

(3) This subsection applies to any body which regulates the practice of a profession and maintains and enforces rules for securing that such of its members as are permitted by or under the rules to act as insolvency practitioners—
(a) are fit and proper persons so to act; and
(b) meet acceptable requirements as to education and practical training and experience.

(4) Any order under subsection (2) above shall have effect from such date as is specified in the order: and any such order revoking a previous order may make provision whereby members of the body in question continue to he treated as authorised to act as insolvency practitioners for a specified period after the revocation takes effect.

(5) In this section references to members of a recognised professional body are references to persons who, whether members of that body or not, are subject to its rules in the practice of the profession in question.'.[Mr. Fletcher]

Brought up, and read the First time.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alex Fletcher): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will be convenient to take new clause 6—Applications for authorisation.
Government new clause 7—Grant, refusal and withdrawal of authorisation.
Government amendments Nos. 5 to 7, 233 and 239.

Mr. Fletcher: This clause replaces the existing delegation clause 5 in the Bill, and provides that a member of a recognised professional body is authorised to act as an insolvency practitioner if he is permitted to act by the rules of that body. We expect such members to comprise the largest proportion of qualified insolvency practitioners in future. On application by a body for recognition, the Secretary of State will have regard to whether it regulates the practice of a profession and will seek assurances that it will be able to maintain and enforce rules for securing that those of its members authorised to act as insolvency practitioners are fit and proper persons, and meet acceptable requirements as to education, practical training and experience.
Our consultations with the main accounting and legal bodies will ensure that those requirements are suitably balanced between the member of a recognised professional body and the person authorised to act by the Secretary of State or other relevant authority.
The purpose of new clause 6 is to lay down the manner, content and form of an individual's application to the


relevant authority. It also gives the latter various powers in relation to applications. Amendment No. 7 deletes clause 3 dealing with applications for certificates. The relevant authority will also have to consider whether the applicant meets the prescribed requirements with respect to education, practical training and experience. This differs from existing provisions in the Bill, in that we have added education and have stipulated that training should be practical.
The effect of these changes is to ensure that those applying to relevant authorities—and we expect that they will mainly be individuals who do not belong to professional bodies recognised for insolvency purposes—will have to meet requirements equally demanding as those faced by members of professional bodies.

Mr. Gerald Bermingham: Will the Minister tell us whether he sees the Department's role as supervisory? Each of the professional bodies has its own rules and regulations about training and, of course, there ought to be some uniformity between them. In future, does the Department see itself telling the Law Society, the Bar Council, the Institute of Chartered Accountants and the Institute of Insolvency Practitioners exactly what remit they must follow to secure adequacy of training?

Mr. Fletcher: I would not use the term supervisory body, but, as the hon. Gentleman suggests, it is important there should be a balance of expectation between the relevant authority and the qualifications, education, training and experience looked for by the professional body. This will be done. At the moment, we are discussing with the professional bodies precisely what standards and what rules there should be for establishing this new arrangement, because there must be similarity in the way that various bodies and the Secretary of State exercise their powers. That is what the hon. Gentleman has referred to, and I hope that clarifies the point he made. It is not just a matter of making sure that the new arrangements continue to be managed properly by the professional bodies; it is a matter of saying that they get off to a good start and that rules are laid down that can be referred to if any doubt or any questions arise in future.

Mr. Bermingham: The Minister has pinpointed the matter that worries me. Is the Department of Trade going to say to the Institute of Chartered Accountants or the Institute of Certified Accountants, "These are the criteria which we will demand in the training courses so that a person may become an insolvency practitioner"? If that is the case, it seems that the Department of Trade is seeking to interfere in the standards and codes of conduct of those professional bodies.

Mr. Fletcher: We are making sure that we get off to a good start. It is not a matter of laying down rules, but a matter of agreeing with the professional bodies. I take the implication of the hon. Gentleman's point, that these bodies are well used to regulating the professional standards of their members. However, we must try to achieve the maximum amount of equivalence of treatment between the individual bodies—there will be several of them—and the way the authorisation is carried out by the Department. For that reason, we are having consultations with the professional bodies and wish to lay down guidelines for their benefit as well as for our own.
I was saying that we expect that those who are authorised by the relevant authority will be mainly individuals who do not belong to professional bodies recognised for insolvency purposes. I added that they will have to meet requirements equally demanding as those faced by members of the professional bodies. That is the obverse of the point made by the hon. Gentleman. For obvious reasons there cannot be the same requirements for those applying to the Secretary of State, because they will have a different background from that of members of professional bodies. We will seek to balance them as near as we can, and our consultations with the main professional bodies are continuing on that basis. One other change is that subsection (3) will allow more flexibility in fixing the length of time that an authorisation can continue in force.
Amendment No. 5 is necessary, because, whereas clause 2 refers to certification of practitioners by the Secretary of State, the provisions introduced by new clauses 5, 6 and 7 refer to authorisation by membership of a recognised body or by a relevant authority. Accordingly, amendments to clause 2 are necessary to accommodate these changes. The amendment to clause 2, which is amendment No. 6, adds references to the mental health legislation and is as a result of an amendment moved in Committee by my hon. Friend the Member for Tynemouth (Mr. Trotter). It is intended that any person who is subject to either of the specified mental health enactments will be disqualified from acting as an insolvency practitioner. Should an order under the mental health legislation be lifted, it will be possible for a person to apply for authorisation in the normal way. The hon. Gentleman will remember that we considered this matter in Committee.
Turning to amendment No. 233, schedule 9 contains the transitional provisions relating to insolvency practitioners, but makes reference only to clause 2(2). The additions to that clause expand subsection (2) into two subsections, Nos. 2 and 3. Therefore, an appropriate amendment to schedule 9 is required. The amendment to schedule 10 is amendment No. 239. Section 302(1) of the Companies Act 1985 provides that an undischarged bankrupt who is formally appointed or assumes the role of a director or liquidator of a company commits an offence unless he first obtains leave of the court to so act. The words, "or liquidator" have been rendered redundant by existing clause 238 and amended clause 248 which disqualifies an undischarged bankrupt from acting as an insolvency practitioner, which term includes a liquidator, in any circumstances. I commend the amendments to the House.

Mr. Bryan Gould: My calculation is that simply to read out the vast number and volume of Government amendments and new clauses, let alone explain them and debate them, would take some hours. Therefore, in commenting on many of the amendments we are constrained to be extremely brief, and I shall be brief.
When we considered the provisions in Committee we had before us a relatively simple, comprehensible structure. Either someone obtained the necessary authorisation by being a member of a recognised professional body or, if he could not achieve that, he applied for individual certification and, no doubt, obtained it from the Secretary of State.
I imagine that the Minister was telling the House that this new and much more complex structure was the


consequence of consultations with the professional bodies. I am rather taken aback to discover that what should have been a relatively simple change has required several new clauses and further amendments. So we are left with a more complicated position.
What we now face leaves open a number of questions. As my hon. Friend the Member for St. Helens, South (Mr. Bermingham) asked, what will be the role of the Secretary of State in this? Surely he will take some sort of co-ordinating responsibility to ensure some uniformity of practice and standards, even if his role is not supervisory.
What will be the attitude of the Secretary of State and the relevant authorities to the questions which engaged members of the Committee when we discussed these matters? For example, what will be the attitude towards members of professional bodies—let us say, the Law Society or the Institute of Accountants—who have not passed specialised papers in insolvency? What rule, principle or practice will he applied?
Given that one of the major objectives of the new provisions is to make it possible for those who have never passed and are never likely to pass examinations or to gain admission to a professional body nevertheless to qualify as insolvency practitioners, what do we know about the criteria which the Minister or the relevant authorities will apply to experience? It is exactly from that area that some of the major problems have arisen in the past and where some of those who have most disgraced the profession have come. I argue that experience, while necessary as a qualifying condition simply because it is needed for transitional purposes, should be limited to that transitional period and that we should be aiming to move towards a profession where either membership of a recognised professional body or the passing of some recognised examination should be the essential precondition for entry into the profession. Will the Minister explain how the new structure will reflect upon and influence those matters?

Mr. Jeremy Hanley: Will the Minister say what form of consultation he will be holding with the professional bodies during the summer recess? If that consultation is to be meaningful, no doubt coupled with our experience so far—it is unique in my experience to have 1,000 Government amendments made to a Bill of 200 clauses originating in the other place—surely there are bound to be more amendments recommended during the recess. What is the procedure for bringing what might be wise and sensible amendments before the House when right hon. and hon. Members return after the recess?

Mr. Bruce Millan: I must first declare an interest as a member of the Institute of Chartered Accountants of Scotland, which hopes to be one of the recognised professional bodies and has been engaged in discussions with the Government. I am also parliamentary adviser to the institute.
I take the point made by the hon. Member for Richmond and Barnes (Mr. Hanley). We are in difficulty in dealing with this vast number of amendments to a Bill that has already been through the other place and in any case has been under discussion for a number of years, what with the Cork report, the White Paper and so on. It is an unsatisfactory way of dealing with important legislation.
In the new clauses we have a complete rewriting of part I. It so happens that I welcome that, so I am not

complaining about the merits of what the Government are doing. However, it is not a satisfactory way of dealing with legislation, and it is extremely difficult, with not only this group of amendments but with a number of others that we shall be discussing later, to know exactly how the Bill will stand when the amendments have been made. There will be wholesale changes in the Bill if the various Government amendments are carried. I regret that we are dealing with important matters in his way.
I ask the Minister a couple of questions for clarification, and one of them follows on from what my hon. Friend the Member for St. Helens, South (Mr. Bermingham) said. I am not clear what the relevant authority will be, as distinct from the Secretary of State. As I understand it, the definitions of "relevant authorities" are exclusive of the professional bodies. Will the Minister confirm that a number of the other new clauses which refer to relevant authorities do not refer to the procedures under the recognised professional bodies?
If a member of a professional body is not granted authority under new clause 5 by the recognised professional body, I assume that he does not have an appeal from there to the tribunal. If he is turned down by his own professional body, it appears that there is nothing to stop him applying to the Secretary of State or the relevant authority and then subsequently to the tribunal. Will the Minister confirm that all the provisions about tribunals, appeals and so on are nothing to do with new clause 5, which deals with recognised professional bodies?
I come, then, to the matter raised by my hon. Friend the Member for St. Helens, South and by my hon. Friend the Member for Dagenham (Mr. Gould) about the rules. By amendment No. 10, the Government will be providing for rules by way of regulation, and these rules will include
provision as to the matters to be taken into account in determining whether a person is a fit and proper person to act as an insolvency practitioner.
As I read it, the amendment will apply to professional bodies as well as to the relevant authorities.

Mr. Alex Fletcher: indicated assent.

Mr. Millan: If that is correct, there will be a supervisory function by the Secretary of State. He will lay down the rules by way of regulation which will apply to applications to professional bodies as well as to applications to the relevant authorities. So there will be an element of standardisation. I do not complain about that, but it is unsatisfactory. We are dealing with it at a late stage in our consideration of the Bill, and we have no idea so far what is likely to be provided for in these regulations and we have no idea how far they will impose obligations on professional bodies and how far the professional bodies will have to change their internal rules and procedures to meet the regulations.
As I see it, by a subsequent amendment there will be supervision, but at the moment we have no idea what that supervision may entail.

Mr. Tim Smith: I am a member of the Institute of Chartered Accountants in England and Wales, and its parliamentary adviser. Obviously the institute would hope to become a recognised professional body for the purposes of the new clauses.
I have a lot of sympathy with what has been said in the debate. Part of the answer to the hon. Member for Dagenham (Mr. Gould), who asked how we would


achieve a degree of consistency in the new arrangements, is that there is a precedent. It is not unprecedented for the Department to recognise bodies in this way because four are already recognised for the purposes of auditing under the Companies Acts. The Department does not recognise a body and leave it at that: it has a role in constantly supervising and ensuring that the body concerned maintains the highest standards. Nevertheless, a lot of detailed matters need to be dealt with.
I wish to ask two questions of my hon. Friend. First, as I did not have the good fortune to be a member of the Committee, I am not clear about the position of those insolvency practitioners who will be qualified by virtue of their experience. When the provisions in relation to auditors were enacted in 1948, only those qualified by experience up to the time that the Act came into force were recognised. That would seem to be the right parallel.
Secondly, I imagine that the changes to the Bill will be considered in another place, I hope in October rather than next week. If it is in October, those who have an interest in these matters will have had an opportunity to consider them. I understand that the new clauses under consideration today were tabled last Thursday, so that effectively there has been a good deal less than a working week in which to consider them. I hope that my hon. Friend will confirm that he is prepared to consider further representations if the interested parties have views to offer on them.

Mr. Bermingham: Consideration of the Bill is beginning to sound like the well-known musical which speaks of 1,001 nights. This is a Bill of 1,001 amendments, or small cuts. With respect to the Minister, we still seem not to have it right. I wish to draw his attention to several minor points.
As my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) said, amendment No. 10 refers to laying down the prescribed rules. Who will advise the Secretary of State what should be in the prescribed rules? We are now getting into a cyclic argument. I sincerely hope that the persons who advise the Secretary of State will be from among insolvency practitioners. I would shudder if I thought that civil servants would do this. The Minister knows well why I say that, after one or two comments which I made in Committee about advice received by Ministers on occasion.
With regard to new clause 5, I draw the attention of the Minister to the word "acceptable", which I suggest is the wrong word to use. It would be far better to use "prescribed". Indeed, new clause 12 contains a definition of "prescribed". This would perhaps get us out of the problem.
I should have declared an interest at the beginning of my speech, which I know is well known to hon. Members. I am a practising barrister and have acted as a solicitor in insolvency in the past and no doubt will do so again in future, so let the record show that the Bill is of some considerable interest to me.
I do not necessarily wish to see the Bill go on to the statute book. I shall have some comments to make on certain other clauses which are gobbledegook and will lead to litigation. Needless litigation benefits nobody. This is our last opportunity to attempt to get it right, bearing in

mind that it has taken over 100 years since the last Bill on these matters was brought in by Joseph Chamberlain in 1882, if my memory serves me correctly.

Mr. Fletcher: I remember him.

Mr. Bermingham: The Minister says that he remembers him. I say no more than that.
New clause 7 refers to the relevant authority which grants the application. The authority is to have regard to
the information furnished by the applicant
and
such other information, if any, as it may have".
It is not clear whether the applicant will have any right of access to such information. All professional bodies at some stage receive the almost malicious complaint from a disgruntled or dissatisfied customer. Surely the applicant should have access to that sort of information, if nothing else, in order to rebut the allegation. It may well be that those other sources of information contain defamatory material which, if disseminated, would cause considerable professional damage.

Mr. Gould: I am sure that my hon. Friend will agree that the rules of natural justice suggest that the provision as drafted is curiously defective, unless the Minister were to argue—and I am not sure that this would be sufficient answer—that the right of appeal would cure any such difficulties.

Mr. Bermingham: I entirely accept what my hon. Friend says.
New clause 9 seems merely to give the applicant a right to make written representations to the authority. I suggest that that is not sufficient, and that the Minister should reconsider new clause 7 if the rules of natural justice are to be complied with.

Mr. Fletcher: If I may declare my interest, I am a member of the Institute of Chartered Accountants of Scotland, members of which, I observe, are just in the majority this evening, although I do not know what that proves.
The hon. Member for Dagenham (Mr. Gould) commented on the number of amendments. I apologise that so many amendments have been tabled on Report, and I know that it makes heavy reading for Members participating in the debate. The hon. Gentleman will appreciate that a number of them flow from undertakings which I gave in Committee. A number of groupings encompass technical amendments or are minor matters. The group of 28 amendments, starting with Government amendment No. 20, is concerned only with the definition of security throughout the Bill. Starting with Government amendment No. 25, there are 19 drafting amendments. I take the point that this is an unusually large number of amendments on Report, although I hasten to add that I think that it is not quite 1,000.
My hon. Friend the Member for Richmond and Barnes (Mr. Hanley) mentioned the question of consultation during the recess. My hon. Friend the Member for Beaconsfield (Mr. Smith) asked whether the Bill will be going to another place in the spillover of the Session. The answer is yes. There is, therefore, further time for certain matters. However, it should be remembered that the Bill started in the Lords so that the ability of the other place to make amendments is restricted in the usual way.
The hon. Member for Dagenham asked about professional members who have no special training or


experience. They will not be authorised. Part of the transitional arrangements is that, if a person is acting as a liquidator when the Bill is enacted, he will continue to act as a liquidator in a liquidation. Thereafter, members of professional bodies will have to show that they have the requisite amount of training and experience before being authorised by the professional body to act as liquidator. Non-professional persons will have to satisfy requirements of training and experience and show that they are fit and proper persons in respect of professional bodies, that is, their own assessment of the fitness of the member, plus the guidelines laid down in the rules which will decide whether they will be authorised by the professional body.
The right hon. Member for Glasgow, Govan (Mr. Millan) referred to the tribunal. One reason for the large number of amendments is that the professional bodies were unhappy about having a tribunal second-guessing their authorisations. That is understandable. A professional body can choose whether to seek recognition or to be regarded as a relevant body. If it seeks recognition, the tribunal will not apply to the professional body.

Mr. Millan: What about someone who is not recognised by his professional body and applies to the relevant authority? There is nothing to stop that happening. That must be unsatisfactory, because if a person cannot get his professional body to recognise him as a fit and proper person it is a little odd that he should be able to go to the relevant authority.

Mr. Fletcher: The right hon. Gentleman is correct. Nothing in the Bill will prevent a person who is turned down by his professional body from making an application to the relevant authority. However, in considering the application, the relevant body will take into account the reasons why the applicant was turned down by his professional body.
Having applied to the relevant body, an applicant would have the right to appeal to the tribunal, which would take the final decision.

Mr. Gould: The Minister's confirmation of that point surely reveals that unfortunately, but perhaps typically, in his anxiety to escape the second-guessing of the professional body, he is introducing a system that allows not only a second guess, but a third guess.

Mr. Millan: Will there not be, in effect, an appeal to the tribunal against the decision of a professional body?

Mr. Fletcher: I do not think that the tribunal will take that view. We cannot write into the Bill a provision to prevent an individual from making an application.

Mr. Millan: Why not?

Mr. Fletcher: We cannot prevent people from applying for anything. If a person wishes to make an application to the relevant authority, he will be free to do so. However, I am sure that the relevant authority and, more important, the tribunal will want to know why that person had been turned down by his professional body.

Mr. Hanley: If an individual is turned down by his professional body and is successful on an appeal to the tribunal, will the Secretary of State license him to practise in insolvency or will the professional body be ordered to

register that person? It is important for the integrity of professional organisations that they should not be forced to take on a person whom they had previously rejected.

Mr. Fletcher: The Secretary of State will have no power to direct a professional body to authorise one of its members to be an insolvency practitioner.
I understand the point that is being made, but it would be rare for a person to be turned down by his professional body and be authorised on appeal to the tribunal after applying to the relevant authority. If it happened, that person would be authorised by the Secretary of State and not by his professional body. It is a valid debating point. but the situation is unlikely to arise.

Mr. Tim Smith: My hon. Friend says that the situation is unlikely to arise and that he finds it difficult to envisage a person being turned down by his professional body and subsequently being accepted under the alternative mechanism. Why not put into the Bill a provision to ensure that that cannot happen? Why is that objectionable?

Mr. Fletcher: I am not sure that we can prevent people from making applications.

Mr. Gould: We can.

Mr. Fletcher: A person who wishes to make an application is entitled to be heard.

Mr. Millan: Surely there is a difference between making an application to the relevant authority in the first instance and following the appropriate procedures—it is fair enough if a member of a professional body wants to do that—and the system in the Bill, which allows someone who is rejected by his professional body, which decides that one of its members is not fit to be an insolvency practitioner—because of his lack of experience or training or for other reasons—to circumvent that decision by going through the relevant authority. Ultimately, the appeal to the tribunal is effectively an appeal against the decision of the professional body, a process which other provisions in the Bill are meant to exclude.
Given the difficulty in making further amendments in another place, I am not sure that we can alter the Bill now, but the Government have not got it right.

Mr. Fletcher: The right hon. Gentleman overlooks what I said earlier about the equivalence of treatment and standards which will be in in the rules. If a person is turned down by his professional body and applies to the relevant authority, the authority will make its assessment on the same basis and under the same rules as the professional body made its decision. The right hon. Gentleman said that an applicant might lack sufficient training or experience. I find it hard to believe that the relevant authority or, on appeal, the tribunal would take a different view from the professional organisation.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 6

APPLICATIONS FOR AUTHORISATION

`(1) An application for authorisation under section (Grant, refusal and withdrawal of authorisation) below—
(a) shall be made in such mariner as the relevant authority may direct;


(b) shall contain or be accompanied by such information as that authority may reasonably require for the purpose of determining the application; and
(c) shall be accompanied by the prescribed fee;
and the relevant authority may direct that notice of the making of the application shall be published in such manner as may be specified in the direction.

(2) At any time after receiving the application and before determining it the relevant authority may require the applicant to furnish additional information.

(3) Directions and requirements given or imposed under subsection (1) or (2) above may differ as between different applications.

(4) Any information to be furnished to the relevant authority under this section shall, if it so requires, be in such form or verified in such manner as it may specify.

(5) An application for authorisation under section (Grant, refusal and withdrawal of authorisation) below may be withdrawn before it is granted or refused.

(6) Any sums received under this section by a relevant authority other than the Secretary of State may be retained by that authority; and any sums received under this section by the Secretary of State shall be paid into the Consolidated Fund.'.—[Mr. Fletcher.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 7

GRANT, REFUSAL AND WITHDRAWAL OF AUTHORISATION

`(1) The relevant authority may, on an application duly made in accordance with section (Applications for authorisation) above and after being furnished with all such information as it may require under that section, grant or refuse the application.

(2) The relevant authority shall grant the application if it appears to it from the information furnished by the applicant and having regard to such other information, if any, as it may have—
(a) that the applicant is a fit and proper person to act as an insolvency practitioner; and
(b) that the applicant meets the prescribed requirements with respect to education and practical training and experience.

(3) An authorisation shall, unless previously withdrawn, continue in force for such period not exceeding the prescribed maximum as may be specified in the authorisation.

(4) An authorisation granted under this section may be withdrawn by the relevant authority if it appears to it—

(a) that the holder of the authorisation is no longer a fit and proper person to act as an insolvency practitioner; or

New Clause 10—Reference to Tribunal—

`(1) A person on whom a notice is served under section [Notices] above may within twenty-eight days after the date of service give written notice to the relevant authority requiring the case to be referred to the Tribunal referred to in subsection (6) below.

(2) Where a requirement is made in accordance with subsection (1) above, then unless the relevant authority within the period there mentioned—
(a) decides to grant the application or, as the case may be, decides not to withdraw the authorisation; and
(b) gives written notice of that fact to the person by whom the requirement was made, it shall refer the case to the Tribunal.

(3) On a reference under this section the Tribunal shall—
(a) investigate the case; and
(b) make a report to the relevant authority stating what would in their opinion be the appropriate decision in the matter and the reasons for that opinion; and it shall be the duty of the relevant authority to decide the matter accordingly.

(4) The Tribunal shall send a copy of the report to the applicant or, as the case may be, the holder of the authorisation; and the relevant authority shall serve him with a written notice of the decision made by it in accordance with the report.

(5) The relevant authority may, if it thinks fit, publish the report of the Tribunal.

(6) For the purposes of this section there shall be a tribunal—
(a) which shall be known as the Insolvency Practitioners Tribunal (in this Part referred to as "the Tribunal"); and
(b)in relation to which the provisions of Schedule 1 to this Act shall apply.'.

(b) without prejudice to paragraph (a) above, that the holder of the authorisation has failed to comply with any provision of this Part or of any regulations made under it or. in purported compliance with any such provision, has furnished the relevant authority with false, inaccurate or misleading information.

(5) An authorisation granted under this section may be withdrawn by the relevant authority at the request or with the consent of the holder of the authorisation.'.—[Mr. Fletcher.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 8

NOTICES

'(1) Where the relevant authority grants an authorisation, it shall give written notice of that fact to the applicant, specifying the date on which the authorisation takes effect.

(2) Where the relevant authority proposes to refuse an application or to withdraw an authorisation under section [Grant, refusal and withdrawal of authorisation] (4) above, it shall give the applicant or holder of the authorisation written notice of its intention to do so, setting out particulars of the grounds on which it proposes to act.

(3) In the case of a proposed withdrawal the notice under subsection (2) above shall state the date on which it is proposed that the withrawal should take effect.

(4) A notice under subsection (2) above shall give particulars of the rights exercisable under sections [Right to make representations] and [Reference to Tribunal] below by a person on whom the notice is served.'.—[Mr. Fletcher.]

Brought up, and read the First time.

Mr. Fletcher: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this, we may take the following: New clause 9—Right to make representations—

'(1) A person on whom a notice is served under section [Notices] above may within fourteen days after the date of service make written representations to the relevant authority.

(2) The relevant authority shall have regard to any representations made in accordance with this section in determining whether to refuse the application or withdraw the authorisation, as the case may be.'.

Amendment (a), in line 1, after 'under', insert 'subsection (2) of'.

Amendment (a), in line 1, after 'under', insert `subsection (2) of'.

Amendment (b), in line 2, after 'service', insert
'or in a case where he has made representations under subsection (1) of section (Right to make representations) above within twenty-eight days after the relevant authority has given him notice that having considered his representations it has determined to refuse his application or withdraw his authorisation as the case may be'.

Government new clause 11 and Government amendments Nos. 8 and 182.

Mr. Fletcher: New clause 8 does not differ from clause 4(3)(a) in that it requires the relevant authority to give written notice when it grants or proposes to refuse or withdraw an authorisation. However, the new clause goes further by requiring the relevant authority to give more information to the applicant or holder of an authorisation about the date when authorisation takes place or withdrawal takes effect.
New clause 9 gives the person on whom a notice of a proposed refusal or withdrawal of authorisation is served the right to make written representations to the relevant authority within 14 days.
I am grateful to the right hon. Member for Glasgow, Govan (Mr. Millan) for tabling amendment (a) to new clause 9. It clarifies which subsection in the notices clause is being referred to and we are happy to accept it.
New clause 10 differs in several ways from the existing provisions in the Bill. First, it gives a person 28 days instead of 14 days in which to require his case to be referred to the insolvency practitioners tribunal. Secondly, it requires the tribunal to send a copy of its report not only to the relevant authority, but to the person concerned. The relevant authority will have to serve the person with a written notice of its decision made in accordance with the tribunal's report and may also publish the report if it thinks fit.

New Clause 9

RIGHT TO MAKE REPRESENTATIONS

`(1) A person on whom a notice is served under section [Notices] above may within fourteen days after the date of service make written representations to the relevant authority.

(2) The relevant authority shall have regard to any representations made in accordance with this section in determining whether to refuse the application or withdraw the authorisation, as the case may be.',—[Mr. Fletcher.]

Brought up, and read the First time.

Amendment made: (a) in line 1, after 'under', insert 'subsection (2) of'.—[Mr. Millan.]

Clause, as amended, read a Second time, and added to the Bill.

New Clause 10

REFERENCE TO TRIBUNAL

To move the following clause:

`(1) A person on whom a notice is served under section [Notices] above may within twenty-eight days after the date of service give written notice to the relevant authority requiring the case to be referred to the Tribunal referred to in subsection (6) below.

(2) Where a requirement is made in accordance with subsection (1) above, then unless the relevant authority within the period there mentioned—
(a) decides to grant the application or, as the case may be, decides not to withdraw the authorisation; and
(b) gives written notice of that fact to the person by whom the requirement was made, it shall refer the case to the Tribunal.

(3) On a reference under this section the Tribunal shall—
(a) investigate the case; and
(b) make a report to the relevant authority stating what would in their opinion be the appropriate decision in the matter and the reasons for that opinion;
and it shall be the duty of the relevant authority to decide the matter accordingly.

I am, again, grateful to the right hon. Member for Govan for tabling amendments (a) and (b) to new clause 10. I am happy to accept amendment (a), because it clarifies which subsection is being referred to, and amendment (b) is accepted in principle, because a person who makes representations may not consider requiring his case to be referred to the tribunal until he is aware of the result of his representations. The amendment will ensure that he has 28 days to act from when he is given notice of the decision. However, there are drafting difficulties with the amendment. I ask the right hon. Gentleman to withdraw that amendment, because we intend to deal with the matter in an amendment to be moved in the House of Lords.

New clause 10 allows a person 28 days in which to require that his case be referred to the tribunal. However, if he does not make that requirement, and assuming that the relevant authority has not been swayed by any written representations lodged within the first 14 days, new clause, 11 requires that the authority must await the expiration of the 28 days appeal period before giving written notice of the refusal or withdrawal.

Amendment No. 182, which amends the Tribunals and Inquiries Act 1981, is necessary to place the insolvency practitioners tribunal under the supervision of the Council on Tribunals. I commend the new clauses and amendments to the House.

Mr. Millan: I do not have to make a speech because the Government agree that my amendments are necessary. I accept that amendment (b) to new clause 10 is inelegant, but I thought there was a deficiency in new clauses 9 and 10. I am glad that that is recognised and that the Minister intends the matter to be put right in another place.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

(4) The Tribunal shall send a copy of the report to the applicant or, as the case may be, the holder of the authorisation; and the relevant authority shall serve him with a written notice of the decision made by it in accordance with the report.

(5) The relevant authority may, if it thinks fit, publish the report of the Tribunal.

(6) For the purposes of this section there shall be a tribunal—
(a) which shall be known as the Insolvency Practitioners Tribunal (in this Part referred to as "the Tribunal"); and
(b) in relation to which the provisions of Schedule 1 to this Act shall apply.'.—[Mr. Fletcher.]

Brought up, and read the First time.

Amendment made: (a) in line 1, after 'under', insert `subsection (2) of—[Mr. Millan.]

Clause, as amended, read a Second time, and added to the Bill.

New Clause 11

REFUSAL OR WITHDRAWAL WITHOUT REFERENCE TO TRIBUNAL

'Where no requirement is made under section [Reference to Tribunal] (1) above in respect of a proposed refusal or withdrawal, the relevant authority may, at the expiration of the period within which such a requirement can be made, give written notice of the refusal or withdrawal to the person concerned in accordance with the proposal in the notice given by it under section [Notices] (2) above.'.—[Mr. Fletcher.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 12

INTERPRETATION OF PART I

'In this Part—
prescribed" means prescribed by regulations made by the Secretary of State;

New Clause 18

RESTRICTION ON USE OF COMPANY NAMES

'(1) This section applies to a person where a company ("the relevant company") has gone into insolvent liquidation and he was a director or shadow director of the company at any time in the period of twelve months ending with the day before it went into liquidation; and for the purposes of this section a name is a prohibited name in relation to such a person if—
(a) it is a name by which the relevant company was known at any time in the said period; or
(b) it is a name which is so similar to a name falling within paragraph (a) above as to suggest an association with the relevant company.

(2) Except with the leave of the court, a person to whom this section applies shall not at any time in the period of five years beginning with the day on which the relevant company went into liquidation—
(a) be a director of any other company that is known by a prohibited name; or
(b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company; or
(c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name.

(3) If a person acts in contravention of this section, he shall in respect of each offence, be liable—
(a) on summary conviction, to imprisonment for a term not exceeding six monthsorto a fine not exceeding the statutory maximum or to both;
(b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.

(4) In subsection (2) above "the court" means any court having jurisdiction to wind up companies; and on an application for leave under that subsection, the Secretary of State or the official receiver may appear and call the attention of the court to any matters which seem to him to be relevant.

(5) References in this section, in relation to any time, to a name by which a company is known are references to the name of the company at that time or to any name under which the company carries on business at that time.

(6) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.

"the relevant authority" means—
(a) in relation to a case of any description specified in directions given by the Secretary of State, the body or person so specified in relation to cases of that description; and
(b) in relation to a case not falling within paragraph (a) above, the Secretary of State;
"the Tribunal" means the Insolvency Practitioners Tribunal.'.—[Mr. Fletcher.]

Brought up, and read the First time.

Mr. Fletcher: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 9 and 10.

Mr. Fletcher: The purpose of new clause 12 is to interpret part I of the Bill. and amendment 9 deletes clause 5 from the Bill.
Amendment No. 10 to clause 6 is to give power to make regulations concerning the criteria for assessing whether a person is "fit and proper"; to prohibit acting in conflict of interest and to provide for the supervision of authorised practitioners, and other necessary matters.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

(7) In this section "company" includes a company which may he wound up under Part XXI of the 1985 Act—[Mr. Fletcher.]

Brought up, and read the First time.

Mr. Fletcher: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take the following amendments: (a), in line 36, at end add—
'(8) In this section "director" excludes any director who together with connected persons does not hold more than 5 per cent. of the equity shares of the company.'.
Government amendments Nos. 15 to 17 and 103 and 234.

Mr. Fletcher: As the House is aware, the problems of the so-called phoenix syndrome, as a result of which innocent members of the public or suppliers are often misled by unscrupulous company directors, leading them to sustain often considerable financial loss, have become increasingly apparent during recent times. Many of the provisions of the Bill are directed at preventing such abuse in the future.
We indicated, however, in Committee that the restriction on the subsequent use of a company's name as presently provided by clause 86 of the Bill was perhaps not the best way to approach the problem of abuse relating to the use of names of companies in liquidation, which is one of the manifestations of the phoenix syndrome. The company name itself is often a valuable asset which the liquidator can dispose of to the benefit of the creditors of the insolvent company.
The proposed new clause, rather than preventing the continuing use of a company name, shifts the emphasis to those who have been directors, or shadow directors, of the company in insolvent liquidation in the 12 months before the liquidation. Such directors must not, unless they have the leave of the court, for a period of five years from the commencement of the liquidation, be involved in any other company which uses the same, or a very similar, name, including any trading style used by the liquidated company. Contravention of such provisions will be an offence and may also lead to personal liability for the new company's debts.
Genuine cases of former directors wishing to buy out the business of a company in liquidation will, we feel, be sufficiently rare to justify their having to apply to the court for leave to use the same or a similar name in carrying on the new business. Liquidation will not come about immediately without any warning. There will always be a petition for winding up or a meeting called to pass an appropriate resolution if a company is to be wound up voluntarily, and the persons concerned will have time to apply to the court for leave to continue to be involved in companies with similar names to that of the company in liquidation, for instance, where a group of companies is involved.
Amendment (a), tabled by my hon. Friends the Members for Richmond and Barnes (Mr. Hanley) and for. Tynemouth (Mr. Trotter), seeks to exempt certain directors from the provisions of new clause 18. We feel that such an exemption would lead to unnecessary complications, particularly as there is, within the new clause, provision whereby such persons can apply to the

court for leave to continue to act as a director of a relevant company. It might also provide scope for abuse through the use of nominees or the manipulation of shareholdings at a late stage prior to liquidation. An application to the court in genuine circumstances would prove no more onerous than an application for some form of clearance certificate from the Secretary' of State suggested by my hon. Friend the Member for Richmond and Barnes in Committee in relation to clause 86 which this new clause replaces. I therefore ask my hon. Friends to withdraw their amendment.

Mr. Gould: This is a welcome fulfilment of a promise which the Minister gave in Committee. It is a better and more accurate solution to an obvious problem than is clause 86. The hon. Member for Richmond and Barnes (Mr. Hanley) might be able to persuade me otherwise, but I am inclined to accept the Minister's reasoning.

Mr. Hanley: I tabled the amendment late one night earlier this week in response to yet more new clauses. Considerable research has been done on ministerial statements promising amendments. I counted 27 such occasions and nine new clauses are now suggested
Many of the amendments are in response to the professions. Those practising in insolvency are grateful for the way in which the Minister has responded to their advice. The problem is that the Minister might continue to respond until a Bill to amend this Bill is introduced next Session.
Although new clause 18 is better than it was before, no hon. Member in his right mind would defend anyone who tried to set up another organisation using a name that was like another to defraud innocent people. As I said in Committee, often the name of the organisation is the most valuable asset that a liquidator has. There is another asset—the organisation's managers. Companies that have failed—perhaps through inexperience or, even worse, the deceit of certain directors—might be able to flourish with new capital and new management. It would be a disaster if certain people such as production, design and marketing directors, who are called "directors" but who are really senior managers, were allowed, without having to go to court, to be transferred with the name to another organisation.
I fully accept that the new clause provides that one should go to court. We are trying not only to protect the innocent but to save the businesses that can be saved We are not trying to take the weakest companies to the wall if they can succeed with the help of an intravenous financial drip—for example, new management initiatives. If a valuable commodity such as the name of the business and its senior employees cannot be transferred without too many restrictions—especially, the severe restriction of having to go to court—the Bill may not be doing the job that we had hoped.
I shall not press amendment (a). I have had an opportunity to express my concern and that of many insolvency professionals that the new clause will restrict the power of a liquidator to sell the name of a company with senior management who were innocent of any wrongdoing before the liquidation. Senior managers, who


are sometimes called production or design directors, should be able to transfer freely as long as the liquidator feels that they are bona fide.
I am inexperienced in this matter, so I must explain that I did not declare my interest as a certified accountant earlier in this debate, because I had done so at the beginning of the Committee stage.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 21

AGENCY AND LIABILITY OF RECEIVER FOR CONTRACTS

`(1) Section 473 of the 1985 Act (agency and liability of receiver for contracts) shall be amended as follows.

(2) In subsection (2) after the words "provides" there shall be inserted the words ", and on any contract of employment adopted by him in the carrying out of those functions".

(3) After subsection (4) there shall be inserted the following subsections—
(4A) For the purposes of subsection (2), a receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within 14 days after his appointment.
(4B) This section does not limit any right to indemnity which the receiver would have apart from it, nor limit his liability on contracts entered or adopted without authority, nor confer any right to indemnity in respect of that liability —[Mr. Fletcher.]

Brought up, and read the First time.

Mr. Fletcher: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take amendment (a), line 7, leave out
`or omitted to be done',
Government new clause 20—Disposal of interest in property—
Government amendments 60, 61, 264, 265, 64 to 77, 79, 80, 114, 174, 202 and 208 to 210.

Mr. Fletcher: New clauses 20 and 21 and the 26 amendments to the Scottish receivership provisions in chapter V of part II are principally designed to bring them into line with changes made to those provisions relating to England and Wales, which were made in Committee. They accord with amendments to the England and Wales provisions which the House will be invited to make later.

Mr. Hanley: Amendment (a) stands in my name and that of my hon. Friend the Member for Tynemouth (Mr. Trotter). This is an important point, as new clause 21 introduces a principle that I find difficult to countenance.New subsection (4A) states:
For the purposes of subsection (2), a receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to he done within 14 days after his employment.
This introduces a fairly new principle into this type of law—by doing nothing, the receiver is in effect allowing something to be ratified. If a receiver does not step in and say within 14 days to an employee, "This contract of employment is invalid", three, four or five months later he may be in difficulty. He may be confronted by a person who says, "I have an agreement with this company. I am the employee of a subcontractor to the company. I have been working with the company." The receiver may not have known of the conditions of employment that would have enabled that employee to be rejected within 14 days.

Does this mean that a receiver has to accept the contract of employment of anyone who comes to his attention after the 14-day period?
In a business that has a worldwide payroll there may be people who do not come to the administrative receiver's attention within that 14-day period. This would bind the receiver and later in the Bill the administrative receiver to contracts of employment about which they were totally ignorant. I am concerned that the receiver will be bound by inaction. The 14-day period is far too short for large worldwide receiverships and liquidations. This could be extremely dangerous for the receiver, especially with respect to personal liability.

Mr. Fletcher: I am afraid that the amendment proposed by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) is not acceptable. When I move amendment No. 29 I shall explain in more detail our proposals in relation to the liabilities of receivers generally in England, Wales and Scotland.
I hope that I can allay my hon. Friend's concern. He is afraid that the court will consider a receiver to have adopted a contract of employment where he fails to inform an employee that he is not adopting his contract after 14 days have elapsed—perhaps where the receiver is in ignorance of the contract or simply omits, by accident, to give notice of non-adoption because the employee has contributed no service to the company during the 14 days' grace provided for by new subsection (4A) of section 473 of the 1985 Act. That is not the intention. New subsection (4A) is designed to catch the case where a receiver knowingly allows an employee to contribute his services and says nothing to him for more than 14 days about payment for those services.
Current law appears to allow the receiver to say to the employee that his contract is with the company, that the company is insolvent and that he has no intention of paying him. This would clearly be wrong, as my hon. Friend the Member for Richmond and Barnes pointed out. We allow the receiver a period of grace in which to decide whether to adopt contracts of employment. New subsection (4A) does that, and the grace period is a fortnight.
If the receiver knowingly allows an employee to contribute his services and says nothing to him for more than 14 days about his contract of employment, he should not be allowed to refuse to make payment for those services. Given the current state of the law, I am afraid that that would be the effect of my hon. Friend's amendment. I hope that he will withdraw it in the light of my remarks. If I have not entirely reassured him, perhaps he would be kind enough to allow me to move amendment No. 29 before pressing me further on this point.

Mr. Hanley: Will this principle of adoption by not doing anything be extended to other contracts outside employment? If so, it will have remarkable consequences.

Mr. Fletcher: No. We are dealing with a particular situation in current law.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 20

DISPOSAL OF INTEREST IN PROPERTY

' —(1) Section 477 of the 1985 Act (disposal of interest in property) shall be amended as follows—

(2) In subsection (2)—


(a) at the beginning there shall be inserted the words "Subject to subsection (2A) below,"; and
(b) the words from "But that authorisation" to the end of the subsection shall be omitted.

(3) After subsection (2) there shall be inserted the following subsections—
(2A) In the case of an application where a fixed security over the property or interest in question which ranks prior to the floating charge has not been met or provided for in full, the court shall not authorise the sale or disposal of the property or interest in question unless it is satisfied that the sale or disposal would be likely to provide a more advantageous realisation of the company's assets than would otherwise be effected.
(2B) It shall be a condition of an authorisation to which subsection (2A) above applies that—
(a) the net proceeds of the disposal: and
(b) where those proceeds are less than such amount as may be determined by the court to be the net amount which would he realised on a sale of the property in the open market by a willing seller, such sums as may be required to make good the deficiency,
shall be applied towards discharging the sums secured by the fixed security.
(2C) Where a condition imposed in pursuance of subsection (2B) above relates to two or more such fixed securities that condition shall require the net proceeds of the disposal and, where paragraph (h)of that subsection applies, the sums mentioned in that paragraph to be applied towards discharging the sums secured by those fixed securities in the order of their priorities.
(2D) A copy of an authorisation under subsection (2) above certified by the clerk of court shall, within 14 days of the granting of the authorisation, be sent by the receiver to the registrar of companies.
(2E) If the receiver without reasonable excuse fails to comply with subsection (2D) above, he is liable to a fine and, for continued contravention, to a daily default fine.".'.—[Mr. Fletcher.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 13

RIGHTS OF OCCUPATION ETC. OF BANKRUPT'S SPOUSE

'(1) Where a spouse's rights of occupation under the Matrimonial Homes Act 1983 are a charge on the estate or interest of the other spouse or of trustees for the other spouse and the other spouse is adjudged bankrupt—
(a) the charge shall continue to subsist notwithstanding the bankruptcy and, subject to the provisions of that Act, shall bind the trustee of the bankrupt's estate and persons deriving title under that trustee: and
(b) any application by that trustee for an order under section 1 of that Act shall be made to the court having jurisdiction in relation to the bankruptcy.

(2) Where a person and his spouse or former spouse are trustees for sale of a dwelling house and that person is adjudged bankrupt, any application by the trustee of the bankrupt's estate for an order under section 30 of the Law of Property Act 1925 (powers of court where trustees for sale refuse to exercise powers) shall be made to the court having jurisdiction in relation to the bankruptcy.

(3) On such an application as is mentioned in subsection (1) or (2) above the court shall make such order under the said section 1 or the said section 30 as it thinks just and reasonable having regard to the interests of the bankrupt's creditors, to the conduct of the spouse or former spouse so far as contributing to the bankruptcy, to the needs and financial resources of the spouse or former spouse, to the needs of any children and to all the circumstances of the case.

(4) Where such an application is made after the end of the period of one year beginning with the first vesting, under Chapter V of this Part, of the bankrupt's estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors outweigh all other considerations '—[Mr. Fletcher.]

Brought up, and read the First time.

8 pm

Mr. Fletcher: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss Government new clause 14—Rights of occupatiom of bankrupt—Government new clause 15—Payments in respect of premises occupied by bankrupt—and Government amendments Nos. 137, 138, 149, 161 and 247.

Mr. Fletcher: This group of amendments is the Government's response to representations made both in another place and in Committee in relation to the recommendations of the review committee on the treatment of residential property occupied by a bankrupt's family. The review committee drew attention in particular to the position of a bankrupt's spouse who had no legal interest in the home. The review committee recommended that greater regard be had to the interests of the bankrupt's family, who were often innocent victims of the bankruptcy. The committee also recommended that a trustee in bankruptcy should not be able to dispose of a bankrupt's interest in a relevant property without an order of the court.
The amendments that were tabled in another place on this subject were unacceptable to the Government, because, in giving too much weight to the interests of the family, they tilted the balance too far away from those of the bankrupt's creditors. We remain convinced that the interests of creditors must remain a high priority.
As the House is aware, we have consulted on the subject but, as I indicated in Committee, the consultation produced no consensus of opinion as to the path to be followed, although several useful comments were received, which we have taken into account in framing our proposals. It may assist the House if I explain briefly the effect of the principal amendments. First, however, I should like to stress a point made by the review committee in paragraph 1119 of its report. It is a point not dealt with specifically in the amendments, because it is a question not of legalities but of good practice. The review committee said:
Trustees have usually acted with humanity both in the manner and in the timing of any sale of the family home … arrangements can often be made for the likely value to the creditors to be provided without a sale".
In very many cases the matter is settled by negotiation without disturbing the family and without involving the court, and there is absolutely no reason why that should not continue to be the case.
Turning to the amendments, new clause 13 sets out the principal proposals. Section 1 of the Matrimonial Homes Act 1983 confers on a spouse without any beneficial estate or interest in a matrimonial home rights of occupation as against the other spouse. At present where the spouse with a beneficial estate becomes bankrupt the spouse without any such interest loses his or her rights of occupation as against the trustee in bankruptcy. Subsection (1) of the new clause reverses that position and the spouse who has no beneficial interest in the property is therefore placed in a similar position to a spouse with a beneficial interest. The position in the case of a spouse with such an interest is dealt with in subsection (2) of the clause and remains basically the same as now. That is to say, that the trustee


needs to obtain an order of the court under section 30 of the Law of Property Act 1925 before being able to sell the property concerned.
Subsection (3) of the clause allows the court to make whatever order it considers just and reasonable on an application by the trustee under either subsection (1) or subsection (2). The criteria to which the court is to have regard are based on those contained in section 1(3) of the Matrimonial Homes Act 1983. The matters mentioned in subsection (3) of the clause strike, we think, the balance sought by the review committee and have the advantage of being based on existing matrimonial legislation, with the necessary addition of the interests of the bankrupt's creditors.
Subsection (4) of the clause provides that, unless there are exceptional circumstances, on any application by the trustee once the period of one year from the date of the vesting of the bankrupt's property has expired, the interests of the bankrupt's creditors are to be paramount. The combined effect of subsections (3) and (4) is that the court is to regard the period of one year as the maximum breathing space to be allowed to the members of the family under normal circumstances, to enable them to adjust to their changed circumstances and either to seek alternative accommodation or arrange the buying out of the bankrupt's interest. The court may, of course, allow only a shorter period, or no period at all, if circumstances warrant it. However, we expect the combined effect of the amendments and the practice of negotiation normally adopted by trustees to result in most cases in a period of grace for the bankrupt's family of the type sought by the review committee.
New clause 14 applies to a limited extent the principles of new clause 13 in the case of a bankrupt who has actual custody of children. This is to cover the situation where the bankrupt has no spouse with occupational rights or, because of a divorce, no spouse at all, but nevertheless has children to bring up. In such a case the needs of the bankrupt's children will be taken into account by the court but not the needs of the bankrupt.
New clause 15 preserves the present position where a bankrupt is able, for whatever reason, to continue to occupy premises comprised in his estate and makes mortgage payments or pays other outgoings in relation to the property. If such payments give rise to the post-bankruptcy acquisition by the bankrupt of an interest in the property, such interest vests automatically in his trustee as after-acquired property under section 38 of the Bankruptcy Act 1914.
This package of amendments goes a long way towards meeting the objectives of the review committee in respect of what is termed the family home. At the same time it achieves an equitable balance between the rights and interests of the creditors and those of the bankrupt's family.

Mr. Gould: A measure of the difficulties that we face is the fact that we are now confronted with new clauses which, to do justice to them, merit some hours of debate. The importance and difficulty of the subject is so great that we ought not to allow these provisions to be passed without substantive debate.
We are also in the difficulty that the consultation process, through which the Government quite rightly

went, ended so recently that hon. Members are little the wiser. The Government may have been privy to the representations and to the consequences of the consultations, but we were not. It would have been useful if we could have seen the representations in published form. We have seen a list of those who made representations, but we have very little idea of what they said or of the balance of opinion on many of the issues. We are therefore compelled to exercise our judgment on the basis of very little information.
It has been apparent from the outset that the obvious interests of the bankrupt's family, who will often be completely innocent parties, remaining in the family home have to be reconciled with the equally compelling interests of a different nature of the creditors who, if they cannot lay their hands on the primary asset, might find themselves in difficulties.
The effect of these provisions means that the whole question has been handed over to the courts. I am sure that the Under-Secretary of State recognises that this is very much the pattern that has been adopted over matrimonial property disputes, where the maximum amount of discretion has been given to the courts. In that sense, the Under-Secretary of State is right to have pursued that course. It reflects fairly accurately the recommendations of the review committee. On that ground, too. it is more acceptable.
It is clear that the structure of the arrangement allows discretion to the court, but that after a period of grace of one year there is a presumption that the creditors' interests will then prevail. I am not sure that that is necessarily as liberal as one would have liked. I enter that caveat without wishing to press it further.
Secondly, the review committee referred not just to children but to ailing, elderly and dependent relatives, yet the provisions make no reference to that point.
There is probably an obvious answer to a drafting point which puzzles me. New clause 14(3)(c) refers to a person who
married the bankrupt immediately before the commencement of the bankruptcy".
I am not quite sure about the significance of the word "immediately."

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 14

RIGHTS OF OCCUPATION OF BANKRUPT

`(1) This section applies where a person—
(a)who is entitled to occupy a dwelling house by virtue of a beneficial estate or interest: and
(b) with whom any children have their home,
is adjudged bankrupt.

(2) Whether or not the bankrupt's spouse (if any) has rights of occupation under the Matrimonial Homes Act 1983—
(a) the bankrupt shall have as against the trustee of his estate and persons deriving title under that trustee the same rights of occupation under that Act as a person who fell within subsection (3) below would have; and
(b) subject to the provisions of this section, that Act shall apply accordingly.

(3) This subsection applies to a person if—
(a) that person is the spouse of the bankrupt;
(b) that person is not entitled to occupy the dwelling house by virtue of a beneficial estate or interest:
(c) that person married the bankrupt immediately before the commencement of the bankruptcy; and
(d) the dwelling house is a matrimonial home of the bankrupt and that person.

(4) Any application by the trustee of the bankrupt's estate for an order under section 1 of the said Act of 1983 shall be made to the court having jurisdiction in relation to the bankruptcy.

(5) On such an application as is mentioned in subsection (4) above the court shall make such order under the said section 1 as it thinks just and reasonable having regard to the interests of the creditors, to the bankrupt's financial resources, to the needs of the children and to all the circumstances of the case other than the needs of the bankrupt.

(6) Where such an application is made after the end of the period of one year beginning with the first vesting, under Chapter V of this Part, of the bankrupt's estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors outweigh all other considerations.—[Mr. Fletcher.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 15

PAYMENTS IN RESPECT OF PREMISES OCCUPIED BY BANKRUPT

'Where any premises comprised in a bankrupt's estate are occupied by him (whether by virtue of section [Rights of occupation of bankrupt] above or otherwise) on condition that he makes payments towards satisfying any liability arising under a mortgage of the premises or otherwise towards the outgoings of the premises, the bankrupt shall not, by virtue of those payments, acquire any interest in the premises.'.—[Mr. Fletcher.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 16

DISABILITIES ON REVOCATION OF ADMINISTRATION ORDER AGAINST INDIVIDUAL

`(1) Where a person fails to make any payment which he is required to make by virtue of an administration order under Part VI of the County Courts Act 1984, the court which is administering the estate of that person under that order may. if it thinks lit, revoke the administration order and make an order directing that this section shall apply to that person for such period, not exceeding two years, as may be specified in the order.

(2) A person to whom this section applies by virtue of an order under subsection (1) above shall not, except with the leave of the court which made that order, act as director or liquidator of, or directly or indirectly take part or be concerned in the promotion, formation or management of, a company (within the meaning of section 1 above).

(3) A person to whom this section so applies shall not—
(a) either alone or jointly with another person, obtain credit to the extent of the amount prescribed for the purposes of section 179(1)(a) above or more; or
(b) enter into any transaction in the course of or for the purposes of any business in which he is directly or indirectly engaged,
without disclosing the fact that this section applies to him to the person from whom he obtains the credit or, as the case may be, with whom the transaction is entered into.

(4) The reference in subsection (3) above to a person obtaining credit includes a reference to—
(a) a case where goods are bailed or hired to him under a hire-purchase agreement or agreed to be sold to him under a conditional sale agreement; and
(b) a case where he is paid in advance (whether in money or otherwise) for the supply of goods or services.

(5) A person who contravenes this section shall be guilty of an offence and liable—
(a) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both;
(b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both. '.—[Mr. Fletcher.]

Brought up, and read the First time.

Mr. Fletcher: I beg to move That the clause be read a Second time.

Mr. Deputy Speaker: With this we may take Government amendment No. 176.

Mr. Fletcher: The Insolvency Bill has repealed most sections of the Insolvency Act 1976, including section 11. which enables the court to make a receiving order where a debtor has failed to make the payments due under a county court administration order. For a number of practical reasons, that section has never been brought into force.
A large number of administration orders are revoked each year. If the section were used to its fullest extent, the Official Receiver would have to deal with numerous extra small cases, which probably did not warrant the investigation. I appreciate that the courts should be able to apply some form of sanction where a debtor is subject to a county court administration order and then does not comply with its terms. Such a debtor has similar privileges to those of a bankrupt, in that the order prevents creditors from pursuing remedies in respect of debts covered by the order.
While preserving the right of creditors, or the debtor himself, to apply for formal bankruptcy, the new clause will allow the court to impose some of the restrictions of bankruptcy without necessitating full bankruptcy proceedings. Of course, the restrictions may be revoked only when the person fails to make the payments under the order. As in the majority of cases the person will have no assets of value and only minimal debts, that does seem to be an appropriate way of dealing with persons who are subject to the administration order procedure.
The imposition of such restrictions will not preclude creditors from taking normal recovery steps, including bankruptcy proceedings, but they will no doubt have regard to the practicalities of recovering anything from a person who has few or no assets.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 17

CO-OPERATION BETWEEN COURTS EXERCISING JURISDICTION IN RELATION TO INSOLVENCY LAW

'(1) An order made by a court in any part of the United Kingdom in the exercise of jurisdiction in relation to insolvency law shall be enforced in any other part of the United Kingdom as if it were made by a court exercising the corresponding jurisdiction in that other part.

(2) Without prejudice to subsections (3) and (4) below, nothing in subsection (1) above shall require a court in any part of the United Kingdom to enforce, in relation to property situated in that part, any order made by a court in any other part of the United Kingdom.

(3) The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory.

(4) For the purposes of subsection (3) above a request made to a court in any part of the United Kingdom by a court it any other part of the United Kingdom. or in a relevant country or territory shall be authority for the court to which the request is made to apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction: and in exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law.

(5) Section 38 of the Criminal Law Act 1977 (execution of warrant of arrest throughout the United Kingdom) shall apply to


a warrant which, in exercise of any jurisdiction in relation to insolvency law, is issued in any part of the United Kingdom for the arrest of a person as it applies to a warrant issued in that part of the United Kingdom for the arrest of a person charged with an offence.

(6) In this section "insolvency law" means—
(a) in relation to England and Wales, provision extending to England and Wales and made by or under this Act or Parts XIX to XXI of the 1985 Act;
(b) n relation to Scotland, provision extending to Scotland and made by or under this Act, Parts XVIII to XXI of the 1985 Act or the Bankruptcy (Scotland) Act 1985;
(c)in relation to Northern Ireland, provision made by or under the Bankruptcy Acts (Northern Ireland) 1857 to 1980, Part V, VI or IX of the Companies Act (Northern Ireland) 1960 or Part IV of the Companies (Northern Ireland) Order 1978;
(d) in relation to any relevant country or territory, so much of the law of that country or territory as corresponds to provisions falling within any of the foregoing paragraphs.

(7) In this section "relevant country or territory" means—
(a) any of the Channel Islands or the Isle of Man; or
(b) any country or territory designated for the purposes of this section by the Secretary of State by order made by statutory instrument.'.—[Mr. Fletcher.]

Brought up, and read the First time.

Mr. Fletcher: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 160, 168, 175, 177, 179, 180, 230A, 245 and 250 to 253.

Mr. Fletcher: In Committee, my hon. Friend the Parliamentary Under-Secretary of State gave notice that clause 194 was to be replaced by a new inter-jurisdictional clause which gave effect to the recommendations of the review committee in chapter 49 of its report. The amendments are consequential on the new clause.
As was explained on that occasion, by virtue of the new clause, courts within the United Kingdom will be able to enforce orders made by the courts of other United Kingdom jurisdictions in the exercise of jurisdiction in relation to insolvency law. The clause creates a complete intra-United Kingdom system of reciprocal enforcement in respect of bankruptcy, winding-up, receivership and the new administration order procedure.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 19

RECOGNISED BANKS ETC.

`(1) The Secretary of State may, by order made with the concurrence of the Treasury and after consultation with the Bank of England, provide that such provisions of Part II of this Act and Parts XVIII to XXI of the 1985 Act as may be specified in the order shall apply in relation to—
(a) recognised banks and licensed institutions within the meaning of the Banking Act 1979; and
(b) institutions to which sections 16 and 18 of that Act apply as if they were licensed institutions,
with such modifications as may be so specified.

(2) An order under this section may make different provision for different cases and may contain such incidental, supplemental and transitional provisions as may appear to the Secretary of State necessary or expedient.

(3) An order under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.'.—[Mr. Fletcher.]

Brought up, and read the First time.

Mr. Fletcher: I beg to move. That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 18, 19 and 228.

Mr. Fletcher: New clause 19 will empower the Secretary of State, with the concurrence of the Treasury and after consultation with the Bank of England, to introduce by order a modified version of the administrative procedure to apply to recognised banks, licensed and other institutions covered by the Banking Act 1979. Pending the making of that order, amendments Nos. 18, 19 and 228 disapply the provisions of part II, chapter III, from recognised banks and licensed institutions.
The evolution of the new procedure, following consultations with practitioners on the detailed provisions, has meant that it has not been possible to devise appropriate modifications to make it suitable for application to Banking Act institutions in time for their inclusion in the Bill. Clearly, such modification is necessary in recognition of the Bank of England's statutory status in relation to the supervision of recognised banks and licensed institutions.
The provisions of the winding-up code already recognise this statutory status. It is intended that an order will be made under new clause 19, which will modify part II, chapter III, in a way which recognises the Bank of England's supervisory responsibilities. The provisions of the winding-up code will be the principal guide in devising the modified procedure, but detailed consultations with relevant Departments will take place.

Mr. Gould: I congratulate the Minister on speaking for several minutes about the Bank of England's supervisory functions, about recognised banks and about banks failing, and for getting right to the heart of the very area which has been occupied by Johnson Matthey Bankers. Can he assure us that the provisions were not tabled in response to that situation?

Mr. Fletcher: I am not surprised at the hon. Gentleman's remarks, but I can give him the assurance that he seeks.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 22

AMENDMENTS OF RESTRICTIVE TRADE PRACTICES ACT 1976

'(1) No restriction in respect of any of the matters specified in subsection (2) below shall, after the coming into force of this section, be regarded as a restriction by virtue of which the Restrictive Trade Practices Act 1976 applies to any agreement (whenever made).

(2) The said matters are—
(a) the charges to be made, quoted or paid for insolvency services supplied, offered or obtained;
(b) the terms or conditions on or subject to which insolvency services are to be supplied or obtained;
(c) the extent (if any) to which, or the scale (if any) on which, insolvency services are to be made available, supplied or obtained;
(d) the form or manner in which insolvency services are to be made available, supplied or obtained;
(e) the persons or classes of persons for whom or from whom, or the areas or places in or from which, insolvency services are to be made available or supplied or are to be obtained.

(3) In this section "insolvency services" means the services of persons acting as insolvency practitioners or carrying out under the law of Northern Ireland functions corresponding to those mentioned in section 1(2) or (3) above, in their capacity as such; and expressions which are also used in the said Act of 1976 have the same meanings as in that Act.

(4) In Schedule 1 to the said Act of 1976 (services excluded from designated services), after paragraph 9 there shall be inserted the following paragraph—
9A. Insolvency services within the meaning of section (Amendment of Restrictive Trade Practices Act 1976) of the Insolvency Act 1985.".'.—[Mr. Fletcher.]

Brought up, and read the First time.

Mr. Fletcher: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 267.

Mr. Fletcher: The purpose of the new clause is to exempt the provision of insolvency services from the application of the Restrictive Trade Practices Act 1976 and to extend that exemption to Northern Ireland.

Mr. Gould: I cannot resist making a brief comment. I am sure that the Minister will recognise that this is one element in a by now very confusing pattern established by the Government in their attitude towards professional bodies. On the one hand, we have deregulation for opticians, solicitors and many other professions; on the other hand, we have the retrenchment of restrictive practices for the stock exchange and in this case for insolvency practitioners. One of these days, will the Minister turn his mind to a coherent competition policy?

Mr. Fletcher: One hit at a time, please.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 4

DATA AND ESTIMATES

'()—(1) The directors of every public company shall secure and collate not less than once in each accounting reference period such data about the company's affairs and transactions and those of its subsidiaries and prepare such estimates of the future course of the business as are necessary to enable a reasonable assessment to be made of the future ability of the company to carry on business as a going concern and to pay its debts as they fall due.

(2) The data and estimates prepared in pursuance of subsection (1) above shall be provided as soon as reasonably practicable to all the directors of the company, to the company secretary and to the auditors.

(3) In the auditors' report the auditors shall state if it is their opinion (having due regard to the nature of the company's undertakings) that the requirements of subsection (1) of this section have not been complied with.

(4) "accounting reference period" has the meaning given in section 2 of the Companies Act 1976; and
auditor's report" has the meaning defined in section 14 of the Companies Act 1967.'.—[Sir B. Rhys Williams.]

Brought up, and read the First time.

Sir Brandon Rhys Williams: I beg to move, That the clause be read a Second time.
The clause stands in my name and in the names of right hon. and hon. Members on each side of the House.
The Bill is entitled "Insolvency" but it also deals with important aspects of company management, and in particular the way in which problem companies are managed by the directors, and their fitness to continue in that capacity in the light of their performance when their

companies are in difficulties. It also introduces a new type of manager, as I read it, in the form of the administrator, who appears in clause 21. Clause 21 says that
an administration order shall not be made in relation to a company … after the company has gone into liquidation".
The Bill therefore is dealing with the procedure which is open to parties concerned with the management before it has reached the point of no return. It seems to be producing a new type of company Siegfried who has to tackle the problem of the companies in difficulties at the stages where they might still be saved by the introduction of some new supervisory element, that is to say, before they have reached the stage at which they can no longer carry on business as a going concern and pay their debts as they fall due.
We must ask ourselves whether that is the best system that we can think of, bearing in mind the number of companies that seem to slide unexpectedly into acute financial difficulties. Many companies seem to reach the brink of disaster before anybody has tried to get something done. All too often, the creditors, the shareholders and even the directors do not know how deeply they are in trouble before reaching the point of no return.
The Bill, especially in clauses 7 to 9, refers to the punishment of directors who fail to carry out their functions in difficult circumstances. Anxieties about those parts of the Bill have been expressed in another place and in Committee. When difficulties arise, it is commonplace for people to ask why nobody knew the company was approaching insolvency, why there was no warning and, in particular, what the auditors were doing.
The long-standing problem of British company law is the weakness of the elements that are expected to act in a supervisory capacity on behalf of the shareholders. It is not sufficient to blame the directors in the present set-up as the only parties who should carry the blame. In the 19th century, Germany evolved the practice of appointing a supervisory board. In Britain, however, we adopted the practice of appointing auditors with specific but limited responsibilites relating to the accounts for former years.
The work of the auditors has extended into other areas related to the financial affairs of companies and, in some ways, their status has become more important. In one way, however, the position of the auditors has been weakened. I may be one of the few hon. Members here who is not a qualifed auditor and I might therefore be speaking out of turn, but I believe that what I have to say is quite widely agreed in the profession. Auditors have become more dependent on the board and oriented towards the service of management. Their duty to provide a service for shareholders in a supervisory role has correspondingly become more difficult to perform.
When things go wrong we blame the auditors—we have all read recently of a company which has been mentioned here in the past half hour—but we are possibly asking too much of them because we do not give them the status that they ought to have in helping to prevent companies from sliding into insolvency. When dealing with problem companies auditors do not have a simple duty in company law to issue a warning note to the shareholders. It is difficult, unhelpful or even improper for them to qualify the accounts with an adverse comment—if the balance sheet and profit and loss account are a correct record of how things were when the accounts were made up. The auditors do not have a clear statutory


responsibility to issue a warning to shareholders and to make known their doubts about the course the business may take in the future.
Some elements of the profession would not wish that situation to be changed; they feel that they would then be taken into an area of prophesy and out of the strictly arithmetical and professional background which they are trained to deal with. The difficulties in many of our public companies that have come to light recently show a deficiency in our company law which in effect is creating insolvency, because the parties that ought to be acting to prevent it are not doing so in time.

Mr. Hanley: Auditors have the power to qualify an audit report if the auditor believes that the company is not a going concern. There is a requirement on directors to state in their report the likely developments in the business of the company and its subsidiaries and, under recent company law, the auditor must consider whether that information is fair. There are therefore some provisions by which an auditor has to consider the future in a modern audit.

Sir Brandon Rhys Williams: I agree with my hon. Friend, but there is a great deal of doubt in the profession about how those functions must be carried out. When a company goes to the market for fresh funds and has to issue a prospectus, the auditors have a well defined responsibility. When a company fails to analyse its own data, nobody is confident about what is happening. Auditors cannot act in a clairvoyant manner because the data on which they might base professional and responsible advice to shareholders has not been prepared or, if it has, it might not be reliable because, in different branches of the business, managers approach the making of estimates or the collecting of data concerning performance, costing. profits and so on, quite differently. They sometimes do that in a way which suits their comparative performance.
When the data is unreliable or the estimates of the costs of the business are based on inadequate knowledge of markets and technical factors, there is an acute difficulty for the auditors. If they sense that the company is coming under the scrutiny of shareholders or institutional investors who are anxious about the way it is going and then come out brazenly with criticisms that are made public, they simply serve to compound the difficulties of a company which might be basically sound and add to the problems which could be corrected if management knew what to do.
All too often, management does not have the necessary professional guidance from people who know what happens in other businesses. It should be noted that 90 per cent.—perhaps a higher proportion—of our public companies are already doing what I am asking. The proportion might even be 99 per cent; but some companies are not doing what I suggest. The managements of those companies might be ignorant of the fact that they are not handling the preparation of data and estimates in a way which many other businesses would regard as commonplace.
I have proposed the provisions of new clause 4 many times before and the text bears the signs of my having received very well-informed professional advice when I first drew it up. I have chosen to refer only to public companies, partly because I do not want to make new

burdens for private concerns and partly because small businesses are naturally able to make their own estimates of where they are going in a way which is quite different from the practice of large companies. In regard to the preparation of data and estimates, small businesses should follow practices similar to those which I recommend for public companies, but it is not necessary to carry that idea into company law.
The great majority of public companies, and all well-managed concerns, collate their records of company performance and make projections of the future course of the business as an elementary precaution and as an automatic aspect of good management. They regard it as a matter of course and an essential element in the control of the business. Because some companies do not do that, however, we have shock insolvencies. We should not be prepared to allow that situation to continue when it can so easily be remedied with existing management and professional resources.
Companies may prepare their forecasts punctually and competently or they may rely upon the hunches of senior management. That can sometimes be a good way to run a business, but it can sometimes be a disastrous way to run a business. I am sure that anyone who has experience of industry or commerce could think of examples of companies that come under those categories.
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We sometimes find that a company is dominated by one powerful individual. A company created by an entrepreneur which has grown to the point where it finds it necessary to go public and which is then managed by the founder with a circle of relatively powerless or ill-informed directors and non-executive directors who do not have the knowledge necessary successfully to challenge the founder's decisions is a strong candidate for sudden insolvency. That is a well-known type of company in the City. They are sometimes profitable but sometimes disastrous.
With that in mind I have stipulated in new clause 4 that the data and estimates required under the clause should be circulated to all the directors, the company secretary and the auditors. I can think of many examples, as I am sure hon. Members can, where there is a clique of directors or members of top management who are fairly well in the know; and there is also an outer circle of people who are supposed to bear the responsibility for management but who are not kept fully informed of what is going on. That is another type of company that is a candidate for sudden insolvency.
If we are to have the doctrine of directors' collective responsibility, we must ensure that all directors are kept fully in the picture about the company's ability to pay its debts and carry on as a going concern. There will be some company secrets. I do not insist that a matter which is so private that if it were disclosed outside the firm it would damage the business should be circulated outside the company. I do not suggest that the data and estimates should be made known to the shareholders or to the public but only to those in the company who have to bear the responsibility for running it and to the auditors. All companies must gain if the directors know what is happening.
Who can decide what the company should be doing about the preparation of estimates and forecasts? Clearly, the professional accountants retained by the shareholders


to supervise the way in which the company tackles its financial responsibility should do that. How can we give the auditors the power and the duty to perform that function discreetly but effectively without damaging the business? I have given that matter considerable thought, as hon. Members may be aware. What I suggest in new clause 4 is the best proposal that I can bring forward for my hon. Friend's consideration. I have been making the same suggestion for a number of years, and I should be pleased now to hear what the Department thinks of it. If it does not like my suggestion, we may hear what it recommends to fill that gap.
I suggest that the auditors must warn the shareholders where it is clear that the company's performance is inadequate having regard to the nature of the business. No two businesses are alike. Forecasts that should be made in one class of business may be superflous in another. The collection of records may be unnecessary in one type of business whereas they ought to be kept as a matter of routine in another.
If the new clause is introduced into company law, as I hope that it will be, we shall not see a rash of qualifications of accounts containing negative warnings to the shareholders. The auditors would be able to say to top management, "Unless you improve the way in which you handle your estimates and make your forecasts, we shall be obliged to warn the shareholders." At that stage, every prudent business will say to the auditors, "Drawing on your experience of what other businesses do, what should we be doing? Will you help us to do it?" That is the best cure that can be recommended for the company that is in financial difficulties.
Auditors must have this extra status. They would have additional status if the clause conferred on them not just the right but the duty to warn the shareholders when the estimates and forecasts are not being competently prepared. The auditors would advise the management that it was approaching the point where the shareholders would have to receive the statutory warning. That would be a far more effective corrective in the majority of cases than the appointment of an administrator with uncertain responsibilities and powers.

Mr. Fletcher: I am grateful to my hon. Friend the Member for Kensington (Sir B. Rhys Williams) for tabling this new clause. I am aware of the serious interest that he has taken in the matter for a number of years. I hope that he will accept that the Bill's purposes go some way towards meeting his objectives. I am sure we can agree on what we should like to achieve, although our approach may be rather different. Important as the legislation is, what my hon. Friend suggests might be more appropriate in a companies Bill. I know that that is what he has tried to achieve over the years.
New clause 4(1) requires some form of management accounts. That is intended not just to assist shareholders but to help to protect creditors from suffering unnecessary loss because of directors' mismanagement. My hon. Friend mentioned the doctrine of directors' collective responsibility. I do not believe that there is any such thing in company law; the director is a director is a director. He may suggest that he was on holiday when something went wrong but, nevertheless, he must find his own reasons for not shouldering the responsibility that might apply to him in the course of his duties.
The clause requires auditors to state that the requirements of the subsection have been complied with—that the data have been collated to enable a "reasonable assessment" to be made of the company's prospects. I believe that my hon. Friend recognises that that creates a difficulty. How can the auditor determine what information is needed to enable the directors, individually, to form a reasonable assessment of what might happen in the future? The clause does not require that information to be made public, correctly because, as my hon. Friend said, it might contain information about the company's affairs which would almost certainly be damaging if it were made known generally and reached a competitor's hands. Directors of all companies, not just public companies, should monitor their company's finances regularly, not just once a year, as would be the case under the clause.
We also believe that it should be up to each director to decide, in the light of his expertise, how best to do that monitoring to protect himself and to carry out his responsibility as a director by safeguarding the shareholders' funds. The view of the Institute of Chartered Accountants in England and Wales about management accounts was given in a memorandum issued by its parliamentary and law committee. That view was:
that the question of definition of such accounts is one which would be open to endless debate as is the question of whether the accounts revealed with sufficient accuracy the state of its trading operation and financial position.
That is our view of statutory management accounts, although naturally we recognise their value in assisting directors to manage their companies' affairs.
I suspect that, in most public companies, such information is already provided to the directors to enable them to prepare their report to the shareholders. Indeed, my hon. Friend said that as many as 99 per cent. of public companies already do this. Schedule 7(6) of the Companies Act 1985 requires the directors' report to contain particulars of important events affecting the company, or any of its subsidiaries, which have occurred since the end of the financial year, and an explanation of likely future developments in that company's business or its subsidiaries. That point was made by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley), who also said that auditors have a duty to qualify the accounts of companies whose affairs they suspect are not in order.
The Bill will create new dimensions to directors' responsibilities. It seeks to achieve the objective that my hon. Friend mentioned at the beginning of his remarks: that directors should act at the earliest possible moment if they believe that their company is getting into difficulties. I should tell my hon. Friend that the Bill will achieve that without going down the path that his new clause recommends.

Sir Brandon Rhys Williams: I do not agree with what my hon. Friend said, but I recognise that the new clause forms part of a body of reforms that is needed in company law. It would have been appropriate to have included it in the Bill, and the Bill suffers because my hon. Friend will not be sufficiently specific about the way in which problem companies should be tackled. At present the Bill would go for the directors after their problems have overcome them: it does not give them the help that they deserve at the time when they most need it. However, in


view of my hon. Friend's comments, which I shall want to study, I do not wish to press the matter further now. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 23

RESPONSIBILITY FOR COMPANY'S WRONGFUL TRADING

'(1) Subject to subsection (3) below, if, in the course of the winding up of a company which has gone into insolvent liquidation, it appears that subsection (2) below applies to a director, the court, on the application of the liquidator or the official receiver, may declare that that director is to be liable to make such contribution (if any) as the court thinks proper to the company's assets for distribution pari passu to such of the company's unsecured creditors as do not fall within the provisions of paragraphs 1 to 3 of Schedule 4 to this Act.

(2) This subsection applies to a director who—

(a) was a director of the company at a time when it was unable to satisfy its debts and other liabilities as they fell due; and
(b) during that time knew or ought to have concluded that there was no reasonable prospect that the company would be able to satisfy all its debts and other liabilities in full; and
(c) during that time knew or ought to have known that the company was continuing to carry on its business to the detriment of any of its creditors.

(3) The court shall not make a declaration under subsection (1) in respect of any person if it is satisfied that he took every step reasonably available to him in the circumstances with a view to minimising any potential detriment to the company's creditors.

(4) For the purposes of subsection (2) and (3) above, the facts which a director of a company ought to know or ascertain, the conclusions he ought to reach, the diligence he ought to display and the steps which he ought to take are those which would be known, ascertained, reached, displayed or taken, by a reasonably diligent person having both—

(a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company; and
(b) the general knowledge, skill and experience that that director has.

(5) The reference in subsection (4) above to the functions carried out in relation to a company by a director includes a reference to any functions which he does not carry out, or has not carried out but which have been entrusted to him.

(6) Subsections (3) to (6) of section 630 of the 1985 Act (responsibility for company's fraudulent trading) shall have effect in relation to a declaration under subsection (1) above as they have effect in relation to a declaration under subsection (2) of that section, and this section is without prejudice to that section.

(7) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.'.—[Mr. Gould.]

Brought up, and read the First time.

Mr. Gould: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Harold Walker): With this, it will be convenient to discuss the following:

New clause 25—Wrongful trading—

'(1) Subject to subsection (3) below, if, in the course of the winding up of a company which has gone into insolvent liquidation, it appears that subsection (2) below applies to a director, the court, on the application of the liquidator, or the official receiver, may declare that that director is to be liable to make such contribution (if any) as the court thinks proper, to the

company's assets for distribution pari passu to such of the company's unsecured creditors as do not fall within the provisions of paragraphs 1 to 3 of Schedule 3 to this Act.

(2) This subsection applies to a director who:—

(a) was a director of the company at a time when it was unable to satisfy its debts and other liabilities as they fell due: and
(b) during that time knew or ought to have concluded that there was no reasonable prospect that the company would be able to satisfy all its debts and other liabilities in full; and
(c) during that time, negligently permitted the carrying on by the company of its business to the further detriment of creditors; or
(d) during that time knew or ought to have known that the company was continuing to carry on its business to the detriment of any of its creditors.

(3) The court shall not make a declaration under subsection (1) in respect of any person if it is satisfied that he took every step reasonably available to him in the circumstances with a view to minimising any potential detriment to the company's creditors.

(4) For the purposes of subsections (2) and (3) above, the facts which a director of a company ought to know or ascertain, the conclusions he ought to reach, the diligence he ought to display and the steps which he ought to take are those which would be known, ascertained, reached, displayed or taken, by a reasonably diligent person having both—

(a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company; and
(b) the general knowledge, skill and experience that that director has.

(5) The reference in subsection (4) above to the functions carried out in relation to a company by a director includes a reference to any functions which he does not carry out, or has not carried out, but which have been entrusted to him.

(6) Subsections (3) to (6) of section 630 of the 1985 Act (responsibility for company's fraudulent trading) shall have effect in relation to a declaration under subsection (1) above as they have effect in relation to a declaration under subsection (2) of that section, and this section is without prejudice to that section.

(7) For the purposes of this section of a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.'.

Amendment No. 287, in clause 10, page 8, line 24, leave out 'every step' and insert 'such steps'.

Mr. Gould: This new clause brings us to one of the most important and widely contested issues in the Bill, and certainly one on which the Committee spent much time. The present clause 10 introduces an extremely valuable concept, and there is widespread support for the Government's attempt to establish the new notion of wrongful trading. However, the new clause is an alternative way to achieve the objective which the Government have set. It is supported by the CBI, the National Consumer Council, the Institute of Directors—although it makes a few minor amendments to the clause, which are expressed in new clause 25—the suppliers of venture capital and by many hon. Members on both sides of the House. A new clause with such unusual unanimity of support cannot be all bad.
From what is known of the Minister's position, and from correspondence between the Secretary of State and some of the bodies that support this measure, it seems clear that the Government share the objectives of the new clause. There is little difference in principle among the parties that have reached a conclusion on the issue. Where we depart from each other, and where most of us depart from the Government, is on the means by which they have chosen to achieve their objective—the drafting of clause


10. It is curious, to say the least, and it is less than clear. In effect, it would bring every director of every company that goes into insolvent liquidation into a big net. However, in most cases, it does so too late, given that we are trying to strike at a course of conduct over a period of time. Subsection (2) brings everyone into the net at the last possible moment.
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Subsection (3) provides the means by which people can escape the net. The method offered to them is also extremely curious and uncertain. It is almost certain that most people will escape the net. I am not sure whether that is the Government's intention, but the CBI and the Institute of Directors are worried that, although people might get out in the end, they will not be sure as to what they must do and show to escape liability. We have the worst of all possible worlds. Everyone will be caught, but too late; the means are provided by which almost everyone will escape, but in conditions of maximum confusion and uncertainty. That is a fairly dreadful list of achievements for a clause, which I accept is well-intentioned. We all agree on what we wish to achieve.
The problem is that the clause departs from the straightforward, easily comprehensible, recommendations of the review committee, which identified wrongful trading and said that we must do something about it. The Committee identified wrongful trading in a way that should commend itself to any reasonably intelligent observer approaching this matter for the first time. He would say, "Let us try to identify the elements of this new course of conduct called wrongful trading." The first thing that one must do in order to be caught by the provision is to trade—to carry on business. To be more precise, the review committee stated that trading meant taking on new liabilities and undertaking new indebtedness to a new group of people. But not everyone who trades will fall within the provisions of what should be clause 10. We are aiming only at those who trade wrongfully—in circumstances where they know, or should have known when they took on those new liabilities, that they had no reasonable prospect of meeting them.
I despair sometimes, because we have put this point repeatedly, and hon. Members who served on the Committee will know that, straightforward though it may seem, we have still not managed to persuade the Minister that this is the obvious and rational way to approach the problem.
My hon. Friends and I do not wish to support the addition of a third element—the defence of escaping liability, even if one falls within the definitions of having traded and having done so wrongfully, if one has taken every reasonable step to reduce the disadvantage to one's creditors. However, for the sake of consensus, I and my hon. Friends will support that defence, although it is otiose. We adhere strongly to the basic definition that wrongful trading means trading in the knowledge that one cannot meet one's liabilities.
Unless the Minister will accept a clause drafted along those lines, he will fail in his objective of striking at wrongful trading, and he will cause the maximum confusion and anxiety in the business community, to very little purpose.

Mr. Steve Norris: I should declare an interest, not as an accountant, but as a business man who was told that the way to find a good accountant was to ask

all the accountants that one knows how many two and two make, and to hire the one who said, "How many do you have in mind?" I represent the thousands of small businessmen who are worried about the effect of the Bill's operation. They are especially worried by what was clause 9 and is now clause 10.
Like the hon. Member for Dagenham (Mr. Gould) and, as he rightly said, every other member of the Commee, I welcome the admirable purpose of the clause, which is to define the concept of wrongful trading and establish it as a rationale for the withdrawal of limited liability. Nobody disputes that, but the danger has always been that we will throw the baby out with the bath water. In an effort to ensure that those who should not be allowed the protection of limited liability are not, we may, on occasions, find ourselves reacting to innocent directors. Such directors may have no more than made mistakes, or have been in a market that collapsed or have had a major supplier or customer who defaulted, or got into trouble in some way with the result that his business has been put into liquidation and he has been caught by the wrongful trading provisions.
With that in mind, clause 10 is too harsh. It is too difficult for the clause as it stands to distinguish between the legitimate directors and those whom we would all want to see banned. Every director, as the hon. Member for Dagenham pointed out, is caught by subsection (2)(a), (b), and (c). I cannot conceive of any circumstances in which any company goes under where the directors could not be said at some point to have been caught by this subsection. That is wrong because it cannot be the purpose of the clause, which is trying to distinguish culpability from non-culpability.
It follows from that that I take a different view from that of the hon. Member for Dagenham on whether subsection (3) provides an escape route through which most directors will be able to travel. The existence of the words "every step" provides a barrier that a liquidator could ensure was equally insurmountable to every director because "every step" is unfortunately a phrase that, in retrospect particularly, is capable of almost any definition. What is meant by "every step"? How can every director, however culpable or innocent, be sure that every step will have been taken?
Four principal bodies have come together on this. The CBI and the Institute of Directors represent the interests of business and individual directors. The British Venture Capital Association represents those who are seeking to use their skill, often in risk situations, to make companies work more efficiently. The fourth body is the National Consumer Council, whose objective is primarily to ensure that the interests of consumers are protected. That alliance is startling in its impact and shows the extent to which there are problems with this clause.
The British Venture Capital Association has said:
If the Bill's wrongful trading clause is implemented as drafted, no sensible professional manager will run the additional risks of personal liability proposed, despite the attractions of share options (which are there to compensate for the loss of job security/pension rights, perks and automatic salary increases which large employers provide).
The same disincentive will apply to company doctors or professional turnaround experts being prepared to go into existing businesses in trouble (which can be rescued, provided the honest/competent manager is not threatened, as at present, by clause 10).
The effect of this will be that fewer small companies will be started by professional managers spinning off from


larger companies. Of those that start, fewer will be able to survive the natural cliffhangers that automatically affect any business. This will happen because their boards will decide on premature voluntary liquidation to ensure that they are not caught by the provisions of clause 10. What is more, where a small business is in temporary difficulties but has a real future if it can get the right sort of company doctor in, the business will simply not survive if the company doctor has to take account of the fact that if he fails—there must always be a high risk of that—he will be caught by clause 10.
The British Venture Capital Association says that clause 10
will seriously damage the health of the UK's small business sector, at a time when a fragile new dawn is appearing for all those committed to an entrepreneurial Britain".
It follows from that that we must look again at the way that clause 10 is drafted.
I am obliged to differ from the solution arrived at by the hon. Member for Dagenham. I do so because the constructive knowledge test that is the essence of new clause 23 is, of itself, capable of creating the same difficulty of retrospective constructive interpretation, as is implicit in the existing form of words. We have to go on a stage further to the ascertainment of conduct showing a connivance at or continuation of a business when it is clear to the directors that they should be taking another course.
New clause 25 appears not in the form that I have set out for the clerk. It should not include subsection (2)(d) (ii). I am afraid that the original drafting of both options appear, and it is not my intention that they should do so. My intention was to insert (2)(c)(i) which has the concept within it of
negligently permitted the carrying on by the company of its business to the further detriment of creditors".
That is what we all want to achieve.
We want to get at the man who was not only a director at the material time but whose company went insolvent and who knew that there was no hope for it. That provision would capture everybody without exception. More particularly, it covers the director who then went on and consciously made the position worse. He is the man who, either through neglect or malfeasance, has forfeited the right to limited liability, and probably the right to be the director of a company in future.
With that in mind, I hope that my hon. Friend the Minister will not regard consideration of clause 10 as closed but will take account of the unanimity of concern expressed not only on both sides of the House but by the organisations that have raised objections to the clause. I hope that he will take whatever opportunity is open to him to have another look at the matter.

Mr. Bermingham: If the Minister wants a section of the Bill to achieve our aim, that is to catch the crook and negligent director and to make them personally responsible for the loss suffered by others, he should begin to listen to those who will operate the legislation—the Institute of Directors, the Confederation of British Industry, the National Consumer Council and lawyers. They are saying precisely what we have said in Committee. Clause 10, or clause 9 as it was, is badly drawn and achieves nothing. It presents a deterrent without teeth. It has had its teeth pulled.
We are now dealing with new clauses 23 and 25, and I concede that the concept contained in new clause 25 is valuable. The section needs to catch negligent directors. All hon. Members have heard of companies which go steadily downhill, and whose directors know that that is happening, and either through sheer incompetence and laziness or sheer negligence allow both the position to deteriorate as each day goes by and the creditors to suffer increasingly.
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Why should people who put others in a position of loss hide behind a screen which denies them personal liability when that loss is entirely their fault? If I drive my car negligently and run over an hon. Member, I am sued because it is my fault. I cannot possibly say, "It was the car that ran him over, not me", and the same is true for negligent directors. They control the business and its direction. If they know that the business is in trouble, they are under a moral duty—we all agreed about that in Committee—to do something about it. Their duty may be to cease trading, to seek help or a further injection of capital, or to restructure the business, but they are not entitled to allow the matter to drift away to the detriment of others.
If the Minister agrees with the philosophy that lies behind the arguments put forward in Committee, in the business world at large and every other section of the community, he must explain why every variation on clause 9, now clause 10, has been peremptorily rejected. Why will he reject the new clauses and use the weight of the Government's majority, or the payroll vote, as it is a Thursday, to force through this piece of nonsense? If, as the Minister said time and time again in Committee, he wants the clause to work, will he explain why he has rejected every one of the numerous ways of achieving that end suggested by people who understand these matters?

Mr. Allen McKay: The new clause gives me the opportunity to refer to a constituency matter that has been exercising me and many others for the past seven months. The clause fits the bill. The last person to be considered in insolvency cases usually appears to be the consumer.
The case relates to a desirable building site in Hoyland Swaine in my constituency, on which the builder is erecting some good houses, in most cases successfully. However, it appears that times became difficult for Manston Builders. It would have been better if the firm had decided that it was in trouble and had been honest, but it was not. It carried on building and selling homes or signing people up for homes before those homes were completed. It did that, although it obviously knew that it was in financial difficulties. Local people knew that it was running into financial difficulties when the suppliers of building materials moved in and retrieved their materials. But even then, the firm allowed people to sign up for homes and to pay deposits of up to £3,000.
I should like to quote an example. Mrs Janet Barber and her husband are extremely hard-working and genuine people. They signed for a bungalow, which is in a beautiful area in my constituency. When the house was seven eighths built, and the builder had informed them that they would be able to move in in a few weeks, they found that the builder had had to move out and had left them with an uncompleted dwelling. The Barbers had gone into debt in buying soft furnishings, carpets and furniture, which


they had had to put into store. They had been promised that in a few weeks they would be able to move in, so they sold their home and moved into lodgings with their parents. When the crunch came, therefore, that couple had sold their home, bought the furnishings and paid the deposit in good faith. Seven months later, they are still in lodgings with their parents.
When the matter was put into the hands of the liquidators the problems started again. Irrespective of the representations that I and the agencies acting on the couple's behalf made to the liquidators, despite the promises continually made to me that it would be only a few weeks until the house was finished, and although not only the Barbers but other people offered the liquidators the price of the completed dwelling in cash, the liquidators did not accept any of those representations or proposals. They were using those half-finished homes as a carrot to attract someone to take the whole site. Under the present law, there is nothing wrong with that because the liquidators are acting for the creditors. However, what is to happen to the poor old consumer? What protection will he have in future? He does not have it now.
Three weeks ago when I rang the liquidators again, they said that a firm was now taking over the site, and the Barbers could not have their home, although on three occasions they had offered the price of the house minus the cost needed to complete it. The liquidators were happy with the price, and I know that because they told me. However, as soon as somebody came along and said that he would buy the whole site, the poor old consumer went to the bottom of the bin and did not matter.
There is need for legislation to deal with that matter. I accept that the creditors need to be looked after, but so does the consumer. That should never happen again. As late as today, I received a final letter from the liquidators saying yet again that a person was taking over the whole site, and that it would take a few weeks to complete. In the meantime, the Barbers and other families have decided that enough is enough. Despite a loss running at £3,000 to £4,000, they have decided that the time has come for them to take up another option. Who will compensate those people for the £4,000 that they have already spent, and can ill afford? The builder knew what was happening when they signed the agreement, but they did not. It was obvious at the time that the company was going towards bankruptcy. That should not have happened. I hope that the Minister will ensure that it does not happen again.

Mr. Fletcher: I sympathise with the case that the hon. Gentleman has made. I cannot ensure that it will not happen again, but the measures we are taking in the Bill provide an opportunity to pursue more vigorously and to more effect directors who act in the way the hon. Gentleman has described.
Clause 10 would allow the court, in the event of an application by the liquidator, to attach personal liability to directors who trade wrongfully. That, of course, would affect their pockets, because they would lose the protection of limited liability, and that is the purpose of the clause. The hon. Gentleman has chosen the correct clause in which to make the point about his constituent.
A number of hon. Members raised other points about the clause. The hon. Member for Dagenham (Mr. Gould) said that we had spent some time discussing this clause in Committee, and that is true. The hon. Member for St. Helens, South (Mr. Bermingham) said that we had

dismissed in a peremptory manner all the recommendations and advice given to us by various bodies. I am bound to say to him that that does not apply to any of the recommendations made to us.
At least three hon. Members referred to a letter from the CBI and the IOD and the NCC. In relation to that, senior officials had a long discussion with all the parties together, but I am afraid that no agreement was reached.
My hon. Friend the Member for Oxford, East (Mr. 'Norris) said there was unanimity of concern. In relation to those three bodies that is the case, but there was no unanimity about how the problem should be tackled. Indeed, on the amendments before the House, there is not complete agreement between my hon. Friend and Opposition Members on what might replace the clause we are discussing.

Mr. Gould: Is the Minister implying that he will accept amendments to the clause on which we could establish unanimity? If he is saying that, it would take us a long way.

Mr. Fletcher: I can safely say that is the case, because I doubt whether unanimity could be achieved among all the parties protesting rather vigorously about this matter.
The hon. Member for Dagenham said that everyone is agreed on the overall policy. I am sure that is so. Everyone is concerned about the abuse of limited liability and the fact that directors of companies which have. shall we say, traded wrongfully appear to be able to walk away from the resulting mess they have created in relation to other people's money and have no liability attached to them. The difficulty, of course, is how best to achieve the objective of making directors personally liable for wrongful trading.
It is suggested that one of the new clauses should be accepted in order to make the Bill more understandable to the layman, not least the director, so that his mind w ill be concentrated at an early stage on the financial problems of the company. There is no doubt that that would be helpful, because the more easily the clauses are understood by the layman the better for him. But our principal purpose must be to ensure that, when tested in the courts, there will be certainty of interpretation leading to effective application and the fulfilment of Government policy. The clause, as drafted, will properly fulfil that need and enable the counts to penalise those who abuse the privileges of limited liability.

Mr. Bermingham: Does the Minister agree that the real argument is whether the clause, as drafted, is effective? The Minister has legal opinion which says it is, and everybody else has legal opinion which says it is not. As a compromise, would the Minister accept a third independent legal opinion between now and the next stage in the Lords? If it proves that the Minister's advisers or his parliamentary draftsmen are wrong, will he bow gracefully to the advice of any independent leading counsel he may choose? It is as simple as that.

Mr. Fletcher: It is the duty of the House to decide whether a Bill should be accepted and how it should be passed into legislation. There have been opportunities in the other place to consider this matter. In the other place there are many eminent legal minds, and there the clause was not amended. Nor was it amended in Committee. Therefore, I cannot recommend the amendments now before the House.
9.15 pm
Subsection (1) of both new clauses would exclude creditors with preferential claims from sharing in the proceeds of a successful wrongful trading application. We have already gone a long way to meet demands to reduce Government preferences. But to accept the subsection would mean that there could be no wrongful trading application where only preferential debts were outstanding. The significance of that is that there are rogue directors, to whom many references have been made, and the paying off of non-preferentials to keep suppliers reasonably happy so that they can start up their businesses again next day—what is referred to as the phoenix syndrome—is one of the tricks of rogue directors, and they could apply it on the basis of the suggested subsection (6). In any event, we argued in Committee that the proceeds of wrongful trading should be for the generality of creditors, and the Government still hold to that view.
Paragraphs (a) and (b) of subsection (2) of both clauses are the same and are in fact cumulative provisions. The starting point for the period of wrongful trading—subsection (2)(a)—requires first that default in payment of one or more due debts must occur. It would not therefore apply whilst the company maintained payments on due debts and avoided a cash flow problem by, for instance, taking deposits and prepayments from customers but failed to supply the goods. It would also enable a director to escape liability if he resigned his directorship immediately before the first cheque bounced and in anticipation of the company first encountering cash flow difficulties, even though the conditions of subsection (2)(b) applied at the time he knew that there was no reasonable prospect that the company would be able to satisfy all its debts and other liabilities in full. I acknowledge that the proposals made by my hon. Friend the Member for Oxford, East and by the hon. Member for Dagenham have some element of certainty, but at the cost of an unacceptable curtailment of liability where there has been conduct which has been wrong and damaging. It does not meet our policy needs, and I cannot accept it.
We believe that it is necessary to deal not only with the case when a company has actually found itself unable to meet its debts, but where the director knew that there was no reasonable prospect of the company avoiding insolvent liquidation; the company may or may not be technically insolvent at that time. In addition, our formula provides more flexibility for directors in that they can go on trading while technically insolvent if there is a reasonable prospect in their opinion that they can trade out of their difficulties or that an arrangement with creditors will solve the financial difficulties.
I wish to stress that under our proposals directors are allowed a reasonable opportunity to consider what steps are available to them to remedy their financial problems. They will not, as some people have claimed, risk having a wrongful trading declaration made against them if they fail to put the company into liquidation immediately a cheque bounces.
The proposition in subsection (2)(c) of new clause 23 and subsection (2)(d) of new clause 25 in our view appears to impose an unnecessary obligation on the liquidator to show that the director not only knew that the situation was hopeless but that it was getting worse because the company was continuing to trade.
Subsection (2)(c) of new clause 25 requires the liquidator to show, as an alternative, not only that the

director had permitted the company to carry on its business to the further detriment of creditors but had negligently done so. I submit that, in trying to make the clause clearer, my hon. Friend has made it more complex.
The obverse of negligence is diligence. That test is clearly set out in subsection (4). I am surprised that the hon. Member for Dagenham did not refer to subsection (4). He pointed to subsections (2) and (3), and I was waiting for him to bring in the very important subsection (4). Subsection (4) of the new clause is, apart from some additional words, an exact copy of subsection (4) of existing clause 10.

Mr. Gould: The Minister is, of course, right that subsection (4) establishes a test which is indistinguishable from that applied by the common law, but the test has to be applied to a course of conduct. The course of conduct is then defined in subsection (3), and it is that definition which is so difficult.

Mr. Fletcher: But the test is applied. My hon. Friend the Member for Oxford, East was arguing for a negligence test, but I believe that clause 4 meets the point that he was making. The additional words in brackets in the new clause in my view add nothing to the meaning of the subsection.
The new clauses in subsection (3) add to existing subsection (3), after the words "every step" the words
reasonably available to him in the circumstances".
In my view, those additional words are unnecessary. A director could not reasonably be expected to take steps which were not reasonably available to him.
Amendment No. 287, tabled by my hon. Friend the Member for Oxford, East, seeks to substitute the words "such steps" for the words "every step" in subsection (3). When the matter was raised in Committee, I said that subsection (4) of clause 10 explained fully that what was meant by "every step" was the steps which a reasonably diligent person would have taken in the circumstances, and that no useful purpose would be served by replacing "every step" with "such steps." If I remember my hon. Friend's new clause correctly, he may well have accepted that point.
Concern was also expressed in Committee about the danger of the courts applying a negligence test and making unreasonable requirements of directors who had had to make difficult decisions on uncertain questions as a matter of business judgment, and in particular doing so with the benefit of hindsight. I am sure that the hon. Member for Dagenham is aware that the courts are accustomed to putting themselves in the shoes of decision makers at the time, faced with all the difficulties, the need for quick decisions and decisions which have to be made in the heat of the moment, whether the defendant is a company director, a surgeon or a drug company. In particular, all the authorities recognise that the company director has a proper role in the exercise of commercial judgment into which the court will not inquire. I believe that this is an important and helpful point which may need to be given more emphasis.
I cannot recommend the new clauses.

Mr. Norris: Will my hon. Friend tell the House whether in his view, accepting that the new clause makes it easier for us to get at the rogue director, it makes it no less attractive for honest directors, company doctors and valuable people operating with companies whose futures


are by no means certain but which have immense potential if they can be established, put right and made to grow? Is he satisfied that those directors will not be more wary in the light of the clause than they ought reasonably to be, given that the purpose of the clause is to strike at the fraudster, not at the honest man?

Mr. Fletcher: I do not believe that the new clause would make it easier to catch the rogue director. I think that the clause as drafted should not hold any fear for company doctors and people whose purpose in the company is quite clearly to try to assist it. That is the usual condition on which the company doctor is employed and the court, if somebody were to suggest to the contrary, is used to recognising that that purpose is indeed a profession.
I hope that clause 10 will make the generality of directors, particularly those who carry a number of directorships, more wary. They will have to consider whether they are capable of applying all care and diligence to every directorship in future. If that results in some individuals reducing the number of directorships that they hold, that will not be a bad thing.

Question put, That the clause be read a Second time:—

The House divided: Ayes 43, Noes 140.

Division No. 284]
[9.24 pm


AYES


Atkinson, N. (Tottenham)
Lewis, Terence (Worsley)


Banks, Tony (Newham NW)
Lloyd, Tony (Stretford)


Bermingham, Gerald
McWilliam, John


Boothroyd, Miss Betty
Madden, Max


Buchan, Norman
Millan, Rt Hon Bruce


Campbell-Savours, Dale
Nellist, David


Clarke, Thomas
O'Neill, Martin


Clwyd, Mrs Ann
Park, George


Cocks, Rt Hon M. (Bristol S.)
Pike, Peter


Cook, Robin F. (Livingston)
Prescott, John


Davis, Terry (B'ham, H'ge H'l)
Redmond, M.


Deakins, Eric
Rooker, J. W.


Dormand, Jack
Short, Ms Clare (Ladywood)


Dubs, Alfred
Short, Mrs R.(W'hampt'n NE)


Dunwoody, Hon Mrs G.
Skinner, Dennis


Faulds, Andrew
Spearing, Nigel


Foot, Rt Hon Michael
Stott, Roger


George, Bruce
Strang, Gavin


Godman, Dr Norman
Thomas, Dr R. (Carmarthen)


Gould, Bryan



Hattersley, Rt Hon Roy
Tellers for the Ayes:


Haynes, Frank
Mr. Allen McKay and Mr. Ray Powell.


Hogg, N. (C'nauld &amp; Kilsyth)



Kaufman, Rt Hon Gerald





NOES


Alison, Rt Hon Michael
Durant, Tony


Amess, David
Eyre, Sir Reginald


Ashby, David
Fenner, Mrs Peggy


Atkinson, David (B'm'th E)
Finsberg, Sir Geoffrey


Bellingham, Henry
Fletcher, Alexander


Blackburn, John
Fookes, Miss Janet


Bowden, Gerald (Dulwich)
Forth, Eric


Brandon-Bravo, Martin
Fox, Marcus


Brown, M. (Brigg &amp; Cl'thpes)
Franks, Cecil


Bruinvels, Peter
Fraser, Peter (Angus East)


Butler, Hon Adam
Gale, Roger


Carlile, Alexander (Montg'y)
Galley, Roy


Carlisle, Kenneth (Lincoln)
Garel-Jones, Tristan


Cash, William
Gow, Ian


Chope, Christopher
Ground, Patrick


Clark, Dr Michael (Rochford)
Hamilton, Neil (Tatton)


Clarke, Rt Hon K. (Rushcliffe)
Hargreaves, Kenneth


Cope, John
Harris, David


Crouch, David
Harvey, Robert


Dorrell, Stephen
Hawkins, Sir Paul (SW N'folk)


Dover, Den
Hawksley, Warren





Hayes, J.
Raffan, Keith


Hayhoe, Rt Hon Barney
Rathbone, Tim


Hayward, Robert
Rhodes James, Robert


Heathcoat-Amory, David
Rhys Williams, Sir Brandon


Hickmet, Richard
Ridsdale, Sir Julian


Hind, Kenneth
Robinson, Mark (N'port W)


Howarth, Alan (Stratf'd-on-A)
Roe, Mrs Marion


Howells, Geraint
Rowe, Andrew


Hubbard-Miles, Peter
Sainsbury, Hon Timothy


Hunt, David (Wirral)
Sayeed, Jonathan


Hunter, Andrew
Shelton, William (Streatham)


Jessel, Toby
Shepherd, Colin (Hereford)


Jones, Gwilym (Cardiff N)
Sims, Roger


Jones, Robert (W Herts)
Smith, Tim (Beaconsfield)


Key, Robert
Soames, Hon Nicholas


King, Roger (B'ham N'field)
Speed, Keith


Knight, Greg (Derby N)
Spencer, Derek


Lawson, Rt Hon Nigel
Spicer, Jim (W Dorset)


Leigh, Edward (Gainsbor'gh)
Stanbrook, Ivor


Lennox-Boyd, Hon Mark
Stanley, John


Lester, Jim
Steel, Rt Hon David


Lightbown, David
Steen, Anthony


Lilley, Peter
Stern, Michael


Lloyd, Peter, (Fareham)
Stevens, Lewis (Nuneaton)


Luce, Richard
Stevens, Martin (Fulham)


Lyell, Nicholas
Stewart, Allan (Eastwood)


McCrindle, Robert
Stradling Thomas, J.


MacKay, Andrew (Berkshire)
Taylor, Teddy (S'end E)


Marland, Paul
Thatcher, Rt Hon Mrs M.


Marlow, Antony
Thompson, Donald (Calder V)


Maxwell-Hyslop, Robin
Thompson, Patrick (N'ich N)


Mayhew, Sir Patrick
Thorne, Neil (Ilford S)


Mellor, David
Tracey, Richard


Merchant, Piers
Twinn, Dr Ian


Meyer, Sir Anthony
Waddington, David


Mills, Iain (Meriden)
Wallace, James


Mitchell, David (NW Hants)
Waller, Gary


Morrison, Hon C. (Devizes)
Wardle, C. (Bexhill)


Murphy, Christopher
Warren, Kenneth


Neubert, Michael
Wells, Bowen (Hertford)


Newton, Tony
Wells, Sir John (Maidstone)


Nicholls, Patrick
Whitney, Raymond


Onslow, Cranley
Wiggin, Jerry


Oppenheim, Phillip
Wilkinson, John


Osborn, Sir John
Wolfson, Mark


Ottaway, Richard
Wood, Timothy


Pawsey, James
Yeo, Tim


Percival, Rt Hon Sir Ian



Pollock, Alexander
Tellers for the Noes:


Portillo, Michael
Mr. Archie Hamilton and


Proctor, K. Harvey
Mr. John Major.

Question accordingly negatived

New Clause 24

SET-OFF OF DEBTS DUE TO AND BY THE CROWN

(1) Where this section applies compensation shall not be available between debts due to or by the Crown under the provisions of any statute and debts due to or by the Crown in respect of contractual obligations

(2) This section applies:—

(a)where a company is being wound up by the court or voluntarily; or
(b)in the case of a company to which a receiver or manager or administrative receiver has been appointed and is in office; or
(c)where a bankruptcy order has been made against an individual; or
(d) where a composition or scheme has been approved by a meeting summoned under section 95 of this Act and has taken effect.'.—[Mr. Gould.]

Brought up, and read the First time.

Mr. Gould: I beg to move, That the clause be read a Second time.
The new clause is a slight variation on an amendment that we debated in Committee. It is designed, as that


earlier amendment was, to reduce the present gross advantage enjoyed by the Crown, in addition to all the other advantages that it enjoys as a creditor, in relation to the set-offs of amounts due to and by an insolvent individual or company.
The Crown enjoys two unfair advantages over other unsecured creditors. First, it may, to its advantage, set off debts due to it for taxes against debts due by it for commercial transactions. Such a set-off is not allowed where the Government might lose out. The arrangement is completely one-sided, and that is where the unfairness lies. Secondly, transactions with the Government are all-pervasive. A right of set-off which may be totally fair in the context of individual creditors becomes an unfair preference when used by each of the many arms of Government to extract their separate and different pounds of flesh. Both of these unfair preferences appear to be contrary to the policy of the Crown Proceedings Act 1947. Both are contrary to the views expressed in the review committee.
The new clause would reduce the effect of these advantages by providing that set-off would be permissible only between obligations of a like nature—between statutory obligations on the one hand and contractual obligations on the other. It is therefore a relatively modest attack on Crown privilege and advantage in this respect, as it leaves many other rights of set-off untouched. It at least makes the distinction between the Crown's role as a revenue raiser and its role as a commercial agent. In that respect, the measure is fair. I hope that it will commend itself to the House that the Crown should be forced to deal with its debtors in separate ways.

Mr. Hanley: The Committee discussed this matter at some length, and this new clause encapsulates most of the arguments of those of us who believe that the Crown has many unfair advantages over ordinary creditors. The Bill aims to protect the ordinary creditor from the ravages of the unscrupulous director and, as we discussed in Committee in relation to preferential creditors, certain unfair powers of the state.
It is ironic that my hon. Friend the Under-Secretary of State who declared his interest as a member of the Institute of Chartered Accountants of Scotland should find himself hoist with his own petard, as this measure was suggested by his institute. The speech of the hon. Member for Dagenham (Mr. Gould) followed the institute's advice. The hon. Gentleman has taken a close interest in its advice, and I hope that my hon. Friend the Under-Secretary of State will take an equally close interest in the well-chosen words of the institute of which he has been a successful and famous member for many years. I hope that my hon. Friend will remain a member of the institute for many years, although, by moving against the amendments of his institute, he risks almost certain censure.
The right of set-off is an equitable right in English law. Any equitable right is a right that may be exercised by the courts only if it is fair. With respect to the Crown, that right is established in statute in certain areas. It would be completely unfair if the Crown were to be allowed a right that is not allowed to others. If a holding company has two wholly-owned subsidiaries, one of which owes money to a company that subsequently becomes insolvent while the other subsidiary is owed money by the company that has

become insolvent, subsidiary A may not offset the debt against subsidiary B. The two subsidiaries are wholly owned by the same holding company, but in law the right of set-off is exerciseable only by one individual legal person.
In the locus of a holding company, however, the state might have two subsidiaries, one being value added tax and the other the Inland Revenue, or another branch that deals with pay-as-you-earn or national insurance contributions. If PAYE is owed money by an insolvent company but the VAT authorities owe money to the insolvent company, an automatic right of set-off is provided for in the Bill. In other words, what is available to the state is not available in exactly the same set of circumstances to companies. That is unfair and, as I said in Committee, this right of set-off should not exist in a Bill that is trying to protect ordinary creditors.

Mr. Millan: I support the arguments in favour of the new clause. The mischief arises from the fact that the Government are treated as a single entity. As a single entity, the Government are far more pervasive than any other single entity, even the grandest holding company. Apart from the mischief that that causes in equity, which the hon. Member for Richmond and Barnes (Mr. Hanley) has graphically explained, there is also the practical question, which many who are experienced in insolvency practice have explained to me, that it is very difficult to get money out of a Government Department that may owe money to a debtor in a liquidation or a bankruptcy. It searches around all the other Government Departments to make sure that nothing is owed on the other side to which they could apply the set-off provisions. Apart, therefore, from equity, it means that in certain circumstances there is difficulty in winding up a particular bankruptcy or liquidation.
For all those reasons, I hope that the Government will be able to accept the new clause. It is a more modest form of the new clause that was moved in Committee. It does not altogether eliminate set-off, but it confines set-off either to statutory obligations on the one hand or to contractual obligations on the other. At the moment the set-off that is available to the Government can apply to all statutory and contractual obligations. A debt in one area can be set off against an obligation in another.

Mr. Andrew Rowe (Mid-Kent): The Government have recently made a welcome change to the VAT regulations. It allows small firms not to be penalised in quite the same way as they were before. This is a welcome move towards recognising the fact that the damage done to a small firm when the Government insist upon taking priority over all other creditors far outweighs the merit of the amount of money that the state receives. The Government should take every opportunity to ensure that innocent sufferers from an insolvency are not put in some cases at a fatal disadvantage when the state insists upon taking its share.

Mr. Fletcher: With regard to Crown preference, the Government have gone a long way to making sure that there is a better distribution of the assets in a liquidation. 
The right hon. Member for Glasgow, Govan (Mr. Millan) said that the Crown is indivisible, and that is indeed the case. With all due respect to this important piece of legislation, I do not think that that is exactly the way that such a truth may be challenged.
The proposed new clause curtails the Crown's right to set-off in a way that the Government consider to be undesirable—indeed, to be absurdly unfair. The new clause would have the effect of placing the Crown in a significantly worse position than that of other creditors. Other creditors would be able to continue to set off contractual debts against statutory debts. To quote an example given in another place by the Lord Advocate, if a local authority as an education authority owes a bankrupt builder £5,000 for work done by him on a school, and the builder owes the local authority as a rating authority £5,000 in rates, the local authority can set off the debt owed by it against the rates owed to it. That, as the House will know, is something that can also be done by commercial businesses. I cannot see why the Crown should be placed in a worse position than other creditors in this respect. Therefore, I cannot commend the clause to the House.

Mr. Gould: I fear that the Minister was no more persuasive on this occasion than when he addressed himself to the same problem in Committee. In particular, it is a little difficult for him to claim credit on behalf of the Government for having reduced the ambit of Crown preference when that was forced upon him by the fact that there was a majority vote against his view. Unfortunately, as I cannot be sure that we have such a majority of votes available to us this evening, I fear that I must beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 26

PREPAYMENT CREDITORS

`(1) This section applies where an individual pays to a company a deposit of money or a pre-payment in relation to a contract for the supply of goods or services by the company for use or consumption other than in the course of business.

(2) Where this section applies the beneficial interest in the deposit or pre-payment shall remain with the individual until the later of—

(a) the performance of the contract of supply by the company;
(b) three months after the relevant date, as defined in relation to companies in Part II of Schedule 4 of this Act.'.—[Mr. Norris.]

Brought up, and read the First time.

Mr. Norris: I beg to move, That the clause be read a Second time.

Mr. Speaker: With this it will be convenient to take amendment No. 284, in page 61, line 11, clause 81, at beginning insert
`In a winding up any deposit of money or pre-payment made before the relevant date (as defined in Schedule 4) in relation to the purchase, leasing, hire or rental of goods from the company or the provision of services by the company for use or consumption other than in the course of business shall, where the goods or service have not been provided to the person who has paid the deposit or made the pre-payment, be returned to that person as his property and shall not be available for the payment of any other debts of the company.'.

Mr. Norris: Earlier we heard about the problem that the constituents of an hon. Member were having with their house. He spoke of the distinction between creditors and consumers, which seems to epitomise the problem that the new clause is designed to cure. That may no doubt be a lay distinction worthy of being drawn, but in practice it is not a distinction that the Bill has ever drawn.
Creditors are very neatly separated into two types, particularly when dealing with the new clause. There are those who have extended credit for an account which they have submitted for payment for services rendered as a commercial undertaking. Presumably there is an element of profit in the transaction for the creditor, and the creditor has had the usual trade opportunities to decide whether he wants to extend the credit to the company. Indeed, if a person does not like what he sees, he will decide not to extend credit to the company.
In that context I remember the stories of some of the small men in the engineering industry who did not lose money when Rolls-Royce went under. It was largely because, in the years prior to the eventual demise of Rolls-Royce, they had simply found that however hard they tried they did not get paid, and they applied a common sense rule of business. If a firm is not going to get paid, there is no point in its supplying goods or services.
That is a process which a commercial creditor can go through, but I am concerned in the new clause with people who are not in that category. They are people who send money in response to an advertisement which solicits money for goods which they subsequently never receive because, with their money safely lodged in the company's hands, the company goes bankrupt and they are left with absolutely nothing. I have called such people deposit creditors, and it is to them that we should address our minds for a moment, if only because their concern, in terms of the volume of complaint and criticism that we hear of, is probably greater titan any of the other concerns that we have been speaking of this evening.
I was reminded of that when, only two days ago. I read that a man behind a shower blind firm which is going into liquidation just three years after another company controlled by him failed is already back in business. The Daily Telegraph reported how a company called Rollaway Shower Blinds had an estimated deficiency to creditors of £426,949, about £63,000 of which was owed to 1,400 people who had answered advertisements in Sunday colour supplements. Some who had paid by credit card had been charged twice, which was no doubt very convenient for the company, but Mr. Alan Ward, managing director, said that the mistakes were caused by overstrained office administration.
We then discover that the crash followed a 1982 failure of a company called Matador Shower Sytems, of which the said Mr. Ward also happened to be a director. On that occasion, creditors lost £252,000 in the liquidation. The creditors meeting was told that Mr. Ward is now trading with a company called Rollway (UK) which, in the light of our previous discussion, is not to be confused with Rollaway, from The Green, Letchmore Heath, Hefts, where Rollaway conveniently and coincidentally also happened to have been based.
It is widely recognised that such practice is intolerable. Through clause 7, concerning the disqualification of directors, and clause 10, on the reduction of limited liability, my hon. Friend the Minister has made provision to deal with that practice. I hope that, as a result of the Bill, it will be reduced. It is for the 1,400 people who have paid money for which they have received absolutely nothing that I am anxious. I understand that there is a business principle which, for convenience, is referred to as the Romalpa clause. It says that a company may add a rider to its invoices which says that the company retains title and goods until they have been paid for.
I have heard what I am trying to do described as a reverse Romalpa clause. We are saying that until a depositor who has sent a cheque to a company gets his goods, he should be treated as though he has retained title in that deposit. He should therefore be able to apply to a liquidator or a receiver and say, "I sent my money. I never had anything in return for it. The company has become insolvent and I should like my deposit back. I retain my claim to it because I have received nothing."
I appreciate that, in those circumstances, trade creditors who would otherwise have ranked pari passu with deposit creditors will be disadvantaged. I regret that, because I am more likely to be a trade creditor than a deposit creditor, but deposit creditors are qualitatively different from those whose invoices have been issued in the nature of trade. Moreover, the vast majority of people believe that they are entitled to be treated differently.
Amendment No. 284 tries to achieve the same end by slightly different means. Without the advantage of detailed advice, I am not able to say which of the two forms of words is to be preferred, but anybody who listens to the consumer programmes that are popular on televison and radio, anybody who reads the newspapers and anybody who has any concern for natural justice, for little people who cannot be expected to have batteries of accountants with a Dun and Bradstreet address facility to establish the status of companies, must want this small protection to be afforded.
I believe that this measure, together with the provisions contained in clauses 7 and 10, will ensure that the Bill achieves its main aim—a greater degree of equity as between those who stand to lose money in a liquidation and those who should be held to blame, if any, in such liquidations.
I commend the new clause to my hon. Friend the Minister. I hope that he will take on board seriously the strength of feeling that there is about this issue.
The other day, the producer of a consumer affairs programme on Channel 4 gave me a large file of correspondence from people who had responded to his invitation and had written on the subject. The diversity of complaints about different industries is frightening. I am aware that the travel and some other industries have indemnity schemes. No doubt such a scheme could be extended. We must have similar protection for all businesses to ensure that what I have described cannot happen in the future.

Mr. Gould: As the hon. Member for Oxford, East (Mr. Norris) explained, new clause 26 is designed to achieve the same objective as amendment No. 284. Like him, I cannot distinguish between the efficacy of either of them. I am happy to endorse all that he said. We share an anxiety which is widely felt for—to use his felicitous description—the deposit creditor.
I am sure that the Minister will accept that there is no doubt about the range and scale of the problem. In Committee, the Minister accepted that it was a problem which should be dealt with. We are again faced with the familiar problem of how best to deal with it and whether it can be dealt with in the Bill.
The trade creditor is different. He offers credit in the normal course of business. He knows the risks. He has a clear understanding of what he is doing. He knows the

benefits that he seeks to achieve. He has various means available to protect himself. He can make all the usual professional checks on the creditworthiness of the person to whom he is extending credit. He can, if he wishes, avail himself of the Romalpa clause, which is used increasingly as trading conditions become more difficult.
The deposit creditor has no such protection. He would be amazed to be told that in making the deposit for some goods or service he was contributing to the working capital of the firm which was meant to be supplying him. He has no means of checking creditworthiness. He does not understand that he is extending credit. He has never heard of the Romalpa clause. He needs protection. Various suggestions have been made as to how that can be achieved. The earliest one, which commanded some support, was the notion that the deposit creditor should be made a preferred creditor, and should be granted a statutory preference. I found that principle a little difficult to accept, because one of the Bill's objectives is to reduce the scope and number of preferred creditors.
The second suggestion was that a type of tracing principle, relying on the law of trust, should be applied. There is a hint of that in new clause 26 where it mentions
the beneficial interest in the deposit".
The third suggestion emerged in Committee. It is becoming known as a reverse Romalpa clause. The idea is that the deposit creditor should be given—without having to do anything—the type of protection that a trade creditor might insist upon in similar circumstances by inserting a Romalpa clause in the contracts through which he supplies goods or extends credit. The new clause and my amendment seek to do that. I believe that they provide a neat and elegant solution in principle. I admit that one could question whether that is properly achieved in either the new clause or the amendment, but I hope that the Minister will accept that we must deal with this matter, and that the Bill is the right place to do it. The solution that we offer must be at least acceptable, even if it is not the best solution.
Therefore, despite any drafting deficiencies, which the Minister's expert advisers can remedy, I hope that he will accept the principle of what the hon. Member for Oxford, East (Mr. Norris) and the Opposition suggest.

Mr. Millan: I wish to make only two points in support of what has already been said. First, many of the people in this unfortunate position have been misled, because advertisements in reputable newspapers—

It being Ten o'clock, the debate stood adjourned.

It being Ten o'clock, MR. SPEAKER proceeded to put forthwith the deferred Question necessary to dispose of the proceedings on Estimates 1985–86 (Class IV, Vote 4).

Class IV, Vote 4

Resolved,
That a further sum not exceeding £39,501,000 be granted to Her Majesty out of the Consolidated Fund to defray the charges which will come in course of payment during the year ending on 31st March 1986 for expenditure by the Department of Trade and Industry on export promotion, trade co-operation, regulation of trading practices and consumer protection, and other services including grants in aid and international subscriptions, and other grants.

MR. SPEAKER proceeded to put forthwith the Question which he was directed to put, pursuant to paragraph (7) of Standing Order No. 19 (Consideration of Estimates).

ESTIMATES 1985–86

Resolved,
That a further sum not exceeding £48,588,165,000 be granted to Her Majesty out of the Consolidated Fund to complete or defray the charges for the service of the year ending on 31st March 1986, as set out in House of Commons Papers Nos. 239, 240, 241, 426 and 427.

Bill ordered to be brought in upon the foregoing Resolutions, and upon the Resolutions [11 July] relating to Estimates 1985–86 by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Peter Rees, Mr. John Moore, Mr. Barney Hayhoe and Mr. Ian Stewart.

CONSOLIDATED FUND (APPROPRIATION) BILL

Mr. John Moore accordingly presented a Bill to apply a sum out of the Consolidated Fund to the service of the year ending on 31 March 1986, to appropriate the supplies granted in this Session of Parliament, and to repeal certain Consolidated Fund and Appropriation Acts: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 160.]

BUSINESS OF THE HOUSE

Ordered,
That, at this day's sitting, the Insolvency Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr.
Neubert.]

Orders of the Day — Insolvency Bill [Lords]

As amended, again considered.

Question again proposed, That the clause be read a Second time.

Mr. Millan: Many deposit creditors are caught out because they have responded to advertisements in reputable newspapers or journals, and are under the mistaken impression that anything advertised in a reputable newspaper is bound to be genuine and that there is no risk. Unfortunately, that is not always true. many companies involved in this business which have a record of going bankrupt and starting again advertise in reputable newspapers.
Secondly, if we had such protection, some trade creditors would be much more careful about extending credit to the companies with which we are trying to deal. They would recognise the additional danger that those companies were trading on depositors' money which, in the event of the company going bankrupt, would not be available to them. Another advantage in such a provision is that it would impose an additional disability on some of the companies which operate in that way now. The new clause will benefit everyone, including trade creditors arid deposit creditors.

Mr. Fletcher: In Committee, I said that I would give serious thought to the problem of consumer creditors arid pre-payments; and this I have done. We found Committee that the well-intentioned proposals by hon. Members on the creation of preferential and even pre-preferential status for such creditors and the imposition of special regulations on traders were impracticable. My hon. Friend the Member for Oxford, East (Mr. Norris) referred to the Channel 4 file, which I saw the other day. It was not any larger than some of the files on this matter that we have seen in the Department I make it clear that we are aware of the size of the problem. The difficulty, as with many aspects of this subject, is how to deal with it.
My hon. Friend said something about a small measure of protection, but the measures of protection that I have considered are by no means small. They seem to be rather complex and require some kind of trust fund, or a system such as that suggested by the hon. Member for Dagenham (Mr. Gould) in his new clause. However, it would appear that neither system would be foolproof. The very persons and types of business men and companies that we are most anxious to catch in this respect are the ones most likely to escape from any of the suggestions that I have heard before and that I have heard again today.
I say that with regret because I should very much like to find a system that would be effective in curtailing this problem. Obviously, as my hon. Friend the Member for Oxford, East said, the measures already in the Bill will be helpful. Hon. Members will know that the Insolvency Law Review Committee considered the problems, and in particular the proposal that statutory arrangements should be made to require companies that hold consumers' prepayments and trust accounts. The review committee concluded that such creditors should not receive preferential treatment and that the trust account proposal is impracticable. That is the view that the Government still hold.
The House may know that pre-payment was the subject of a discussion paper published by the Director General of Fair Trading in October 1984. Although he disagreed with


both the Cork Committee and the Government about the giving of some preferential status to pre-payment creditors, he concluded that the best prospects for the protection of consumers without involving a complicated and far from foolproof system, lies with voluntary schemes designed to cover particular problem areas. I and, I am sure, other hon. Members will be interested in the outcome of the Office of Fair Trading's discussions on this subject. However, I am afraid that I cannot accept the new clauses, partly because I do not believe that they would have the effect for which they hope.

Mr. Hanley: In paragraph 1075 of the report on Insolvency Law and Practice, the review committee says:
Accordingly, we do not propose any amendment in principle of the existing law in this field, but we consider that the new Insolvency Act should contain general provisions, applicable to companies and individuals alike".

Mr. Fletcher: That comment does not differ from my view. The Bill will allow opportunities for consumer creditors to be better placed in a liquidation than at present as well as providing for trade creditors. I have not seen any proposals for preferential or pre-preferential treatment that I consider workable.

Mr. Norris: Earlier, the hon. Member for Dagenham (Mr. Gould) rejected the idea of a preference arrangement for deposit creditors because that muddied the waters more than it cleared them, which is a fair thing to say. In Committee, I was encouraged by the undertaking given by my hon. Friend the Minister to look again at this matter. I am sure that he appreciates that this is of great concern to a great many people. We should try to address ourselves to these issues. I readily admit that the wording suggested to me by those who have been kind enough to advise me may be less than perfect, and that the amendment standing in the name of the hon. Member for Dagenham may be equally imperfect. However, I am saddened that my hon. Friend should reject the notion that anything can be done by a detailed critique of my amendment.

Mr. Gould: Does the hon. Gentleman share my disappointment that the Minister appears to recognise that there is a problem which needs a solution, does not find that our suggestions meet the bill, but produces no suggestions of his own?

Mr. Norris: It is possibly more appropriate that that comment comes from the hon. Gentleman than from me. I shall have to live beyond this night with the consequences of telling my hon. Friend the Minister how disappointed I am with his efforts. He told me that the large fat file which I shall shortly send him will accompany many large fat files which he already has. My hon. Friend will continue to receive such files and to have to respond on television, the radio and elsewhere to the outrage expressed by ordinary people who recognise this genuine problem, and who ask why, if he accepts that a problem exists and something can be done about it, he does not do something about it.
Even at this late stage, I hope that my hon. Friend will bear in mind the significance of this small provision in the 200-clause Bill to many people. However, I recognise the potential imperfection in my new clause, and I beg to seek leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Clause 1

UNQUALIFIED PERSONS NOT TO ACT AS INSOLVENCY PRACTITIONERS

Mr. Fletcher: I beg to move amendment No. 1, in page 1, line 17 at end insert
'or as supervisor of a composition or scheme approved by it under Chapter II or Part II of this Act'.

Mr. Speaker: With this it will be convenient to take Government amendments Nos. 2 to 4.

Mr. Fletcher: These are technical amendments aimed at providing both consistency with existing provisions and clarity of wording generally.

Amendment agreed to.

Amendments made:

No. 2, in page 2, line 4 leave out 'in Scotland'.

No. 3, in page 2, line 6 after 'under', insert 'a deed which is'.

No. 4, in page 2, line 15 leave out from beginning to `to' in line 17 and insert 'References in this section to an individual include, except in so far as the context otherwise requires, references to a partnership and'—[Mr. Fletcher.]

Clause 2

QUALIFICATION OF INSOLVENCY PRACTITIONERS

Amendments made:

No. 5, in page 2, line 32 leave out from beginning to end of line 5 on page 3 and insert—

'(2) A person is not qualified to act as an insolvency practitioner at any time unless, at that time—

(a) he is authorised to act as an insolvency practitioner by virtue of section [Authorisation of members of recognised professional bodies] below; or
(b) he holds an authorisation granted under section [Grant, refusal and withdrawal of authorisation] below.

(3) A person is not qualified to act as an insolvency practitioner in relation to another person at any time unless—

(a) there is in force at that time security or, in Scotland, caution for the proper performance of his functions; and
(b) that security or caution meets the prescribed requirements with respect to his so acting in relation to that other person.

(4) A person is not qualified to act as an insolvency practitioner at any time if, at that time—

(a) he has been adjudged bankrupt or sequestration of his estate has been awarded and (in either case) he has not been discharged;'.

No. 6, in page 3, line 8 at end insert
'or
(c) he is a patient within the meaning of Part VII of the Mental Health Act 1983 or section 125(1) of the Mental Health (Scotland) Act 1984.'.

No. 7, in page 3, line 9, leave out Clause 3.

No. 8, in page 3, line 19, leave out Clause 4.

No. 9. in page 4, line 17, leave out Clause 5.—[Mr. Fletcher.]

Clause 6

RULES AND REGULATIONS

Amendment made:

No. 10, in page 4, line 25, leave out from 'for' to 'shall' in line 29 and insert
'the purpose of giving effect to this Part.

(1A) Without prejudice to the generality of subsection (1) above or to any provision of this Part by virtue of which regulations may he made with respect to any matter, regulations under this section may contain—

(a) provision as to the matters to be taken into account in determining whether a person is a fit and proper person to act as an insolvency practitioner;
(b) provision prohibiting a person from acting as an insolvency practitioner in prescribed cases, being cases in which a conflict of interest will or may arise;
(c) provision imposing requirements with respect to—

(i) the preparation and keeping by a person who acts as an insolvency practitioner of prescrivbed books, accounts and other records; and
(ii) the production of those books, accounts and records to prescribed persons;
(d) provision conferring power on prescribed persons—

(i) to require any person who acts or has acted as an insolvency practitioner to answer any inquiry in relation to a case in which he is so acting or has so acted; and
(ii) to apply to a court to examine such a person or any other person on oath concerning such a case;

(e) provision making non-compliance with any of the regulations a criminal offence; and
(f) such incidental, supplemental and transitional provisions as may appear to the Secretary of State necessary or expedient.

(2) Any power conferred by this Part to make regulations, rules or orders'.—[Mr. Fletcher.]

Clause 7

DUTY OF COURT TO DISQUALIFY UNFIT DIRECTORS OF INSOLVENT COMPANIES

Mr. Fletcher: I beg to move amendment No. 11, in page 5, line 20, leave out subsection (3).

Mr. Speaker: With this it will be convenient to take Government amendment No. 12, amendment No. 259, in page 5, leave out from line 33 to line 12 on page 6 and insert—
'(5) It shall be the duty—

(a) of the liquidator in the case of a company which is being wound up voluntarily; or
(b) of the official receiver in the case of a company which
is being wound up in the court in England and Wales, to provide a written report to the Secretary of State to indicate whether or not it appears that the conduct of each person who was a director of that company at any time during the two years before liquidation has made him unlit to be concerned in management of a company.',
and Government amendments Nos. 13, 14, 183, 184, 261, 262 and 199.

Mr. Fletcher: These amendments fulfil undertakings that I gave in Committee. Amendment No. 12 answers the concern expressed on behalf of directors, that they should not have the threat of being made subject to a disqualification order hanging over their heads indefinitely by preventing an application for a disqualification order being made more than two years after the company has become insoolvent—as defined by subsection (7)—unless the court gives leave for an application to be made out of time.
Amendment No. 199 to schedule 5 will enable rules to be prescribed regarding the reports required to be made about directors' conduct to the Secretary of State by the official receiver, the voluntary liquidator, the administrator or the administrative receiver. The rules will prescribe when he has to report, on which directors he has to report, and the form in which the report must be made.

I hope that having explained the purpose of amendment No. 199 the hon. Member for Dagenham (Mr. Gould) will not need to move amendment No. 259, which duplicates in part what amendment No. 199 will achieve.
I know the particular point that the hon. Gentleman will have in mind. It is that there should be an obligation on the liquidator and others to make the report. We are doing that in the rules because of the other considerations that are attached.
10.15 pm
In Committee concern was expressed by practitioners and those speaking on behalf of creditors, particularly prepayment creditors, that the court should be required to have regard to the extent of a person's involvement in other insolvencies and also whether he was in any way responsible for the company's failure to meet its obligations to customers who had paid in advance for goods or services. That point was stressed by my hon. Friend the Member for Oxford, East (Mr. Norris). We have therefore added two items to the schedule of matters that the court must take into consideration when determining whether a person's conduct makes him unfit to be a director of a company.
Amendment No. 185, which introduces paragraph 5A to schedule 2, will require the court to take into consideration the extent of a person's responsibility for the cause of any company of which he was a director becoming insolvent. Paragraph 5B of schedule 2 will require the court to take into consideration the extent of the director's responsibility for any failure on the part of the company to supply any goods or services which had been paid for in advance.
Finally, amendments Nos. 184, 261 and 262 are necessary to allow the schedule of matters that the court has to take into consideration when determining the unfitness of directors to be divided into those matters which are applicable in all cases where an application is made under clause 7 or clause 8 of the Bill and, in part II, those matters which, because of their nature, are applicable only when the company has become insolvent. An opportunity has been taken at the same time to divide further paragraph (b) of part II of the schedule to highlight a director's responsibility to ensure that not only he but his fellow directors comply with the requirements of clause 77 in respect of meetings of creditors in a voluntary winding up.

Mr. Gould: The Minister will recall that in the Committee discussion, which was substantial, great importance was attached by many hon. Members to the obligation being placed on the liquidator or the official receiver to make a report in each case on the conduct of the directors. The Minister will recall also that he was persuaded by that argument. I listened carefully to what he said. For the sake of my peace of mind and that of my hon. Friend the Member for St. Helens, South (Mr. Bermingham), who perhaps did not hear him, I ask him to give an assurance and make it perfectly clear that by virtue of amendment No. 199 and therefore the addition of that provision to the schedule, rules will be made to provide for the obligation resting on the liquidator and the official receiver.

Mr. Fletcher: I cannot give that assurance, but I shall explain the matter a little more. It was my desire to make


the amendment on the face of the Bill rather than in the rules. As recently as yesterday afternoon, I spent a considerable amount of time on the matter.
Clause 7(5) requires the liquidator to report forthwith. When the liquidator has a positive report to make, we do not wish him to delay. We are not saying when he should do so, but we want it to be forthwith. When we consider two other aspects of timing and the fact that the liquidator has a duty to report in every case, it is better with regard to the form of the report and the timing to put that into the rules.
Let me explain briefly. There is a two-year limit on the amount of time that the liquidator has to make his report to the Secretary of State, so that the director of a company that has become insolvent will know that after two years, except by leave of the court, there is no likelihood of a disqualification order being made against him. At the same time, to minimise the number of times when the Secretary of State would be required to seek leave of the court, in the rules we are asking liquidators to give us their report in each case within 12 months. Those two timings, the laying down of the form in which we wish the reports to be made to the Secretary of State, and the provisions on the face of the Bill, with the need to report forthwith where there is a case for disqualification, require the amendment to make it clear that the provisions will be in the rules and not on the face of the Bill.

Mr. Norris: I am sure the Minister will be able to satisfy my concern in relation to this new apparent undertaking, just as he was able to satisfy the concern of the hon. Member for Dagenham (Mr. Gould). I took the matter of automatic reporting seriously. Without restating all the arguments made on Report, it is clear that automatic reporting does a lot more than merely fill up a lot of files at a Department of Trade and Industry. If that were its only purpose I would be the last to support it, but there is a significant purpose. Even a collection of mill reports in relation to one person might individually be of no substance, but collectively would be valuable information in relation to the other sections of the Bill. I regard automatic reporting as one of the key undertakings given by my right hon. Friend at Committee stage, and in going through these amendments I looked for it in vain. I am told by my hon. Friend that the form in which it appears in Government amendment No. 199 is as an addition to schedule 5. Schedule 5(21A) would then say,
(including, in particular, requirements with respect to the making of periodic returns).".
I understand that the expression "including in particular" by definition implies that other returns may be made. But this is an important return and is certainly not a periodic return, but one made specifically in the circumstances outlined in the amendment proposed not only by Opposition Members but by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) and by me. We want to make it quite clear in the Bill that a liquidator or an official receiver has
to provide a written report to the Secretary of State to indicate whether or not it appears that the conduct of each person.".
and so on. That is a specific and important requirement and I am less than happy that it is deemed to be implicit in a section of an amendment to schedule 5 dealing with the making of periodic returns. If my hon. Friend can assure me that the point has been accepted in its entirety, I am

sure that hon. Members on both sides will not wish to detain the House longer. I would be grateful if my hon. Friend would make that entirely clear, that this has nothing to do or cannot be confused with any other periodic returns that an liquidator or official receiver may be required to make.

Mr. Gould: As the author of the original amendment and of the subsequent laying down of this amendment, the point which worries me is that when I looked at Government amendment No. 199 I had not realised it referred back to section 7(5). What worries me is the use of the word periodic in Government amendment No. 199. Under the rules the cut back is from two years to one year. Is the Minister saying that within one year there must be a report from the liquidator? He shakes his head: therefore it must be that within two years that there must be a report from the liquidator. That does not solve the problem about which we sought and received an absolute undertaking in Committee. It now becomes a matter of honour. We had an undertaking and the system works on undertakings. The Minister spoke to me privately and I accepted what he said.

Mr. Fletcher: I am aware of the commitment made in Committee, and I agree entirely with what my hon. Friend said about the importance of this return. I have already confessed to the House that I am rather disappointed we are dealing with the matter in the rules, and I took some satisfying that we had to deal with it in that way and not on the face of the Bill. Government amendment No. 199 enables the Secretary of State to make detailed provisions about how insolvency practitioners should carry out their functions when reporting under clause 7(5). In particular we propose to set up a system for returns. At determined intervals practitioners will be required to submit a report on what they have done and what evidence of unfitness has been discovered about the directors of the company concerned during the period reported on. The Secretary of State will thus receive reports on all directors who have been involved in insolvency proceedings. The reports will form part of the data base which will gradually be built on all directors who have been involved in insolvency proceedings. That was one of the key matters that we considered in committee.

Mr. Bermingham: I am grateful for the Minister's intervention. As he said, in Committee it became a matter that was fundamental to the Committee, in the collective view of the Committee. It was the general consensus that a rogue or bad director needed to be located and identified as soon as possible so that the various other sanctions against rogue directors could be brought speedily to bear.
At the same time, it is equally right that directors who have no faults—who through adverse trading conditions, the collapse of the market or the collapse of a supplier—can find themselves directors of an insolvent company and should know as soon as possible that their explanation of why the company crashed has been accepted and that their names are clear. In humanitarian terms that is equally important—hence the insistence of hon. Members that brought the matter home in the amendment and in the undertaking.
If I understand the Minister correctly, amendment No. 199 now means that there will be periodic returns throughout the course of the liquidation, and in the questionnaires which the insolvency practitioners have to


complete, whether they have been liquidators or receivers, there will be this definitive question about the directors and in each of the returns submitted during the course of the liquidation within the two-year period the same question will be repeated. It must be remembered that it is sometimes not at the beginning of the liquidation that the fault on the part of a director is found. It may come towards the termination of the liquidation, and the evidence suddenly begins to emerge. If the Minister will reassure the House that these questions which will form the data base of the information available to the Department will be repeated in each return throughout the course of the liquidation, I am sure that many—

Mr. Norris: I share the hon. Gentleman's concern. But was it ever in his mind when he moved amendment No. 22 in Committee that we should be talking about periodic returns? Where does this business of periodic returns come in? We are saying that in the course of a liquidation a liquidator sends a report to the Department of Trade and Industry saying, "I have looked at this chap and he is OK," or "he is not." It was said in Committee—and column 68 of the Official Report confirms this—that we were thinking in the vast majority of cases of no more than a nil return. That was the expression used. There is no mention there of a necessity for periodic returns. That is the cause of the concern which the hon. Member for St. Helens, South (Mr. Bermingham) is expressing and which is shared by a number of Government supporters.

Mr. Bermingham: I am grateful for that intervention. The use of the word "periodic" has prompted a certain question in my mind. If these returns are coming in at various times, what happens if in the first return it is said, "Clear," in the second it is said, "Clear," and in the third it is said, "There is less than clarity in the behaviour of the directors"? Where does that put the directors?

Mr. Fletcher: The use of the word "periodic" has not helped the debate. We are talking about any period up to two years, but I mentioned earlier the time factors in our minds. The word "forthwith" provides immediacy in the Bill and when liquidators are filling in general returns and not making a charge of unfitness, they will be advised by the rules to let us have a report "as soon as possible".
The reason why I mentioned a period of 12 months is that if any action is to be taken on a report there will be a two-year limit on when the Secretary of State can make an application without leave of the court. Therefore, the 12-month and two-year periods should both be prescribed in the rules. However, there should be only one report on the directors in each liquidation, and not a series of reports.

Mr. Bermingham: I suggest that the removal of the word "periodic" might clarify the situation. The rules could show that at a specific date the liquidator has to return a form covering this matter. All of us will then know that what we sought in Committee has been achieved. The word "periodic" is confusing, and if it stays in the Bill all sorts of things will happen and we shall not get the clarity that we seek in ensuring that there will be a return about the conduct of a director in every case.

Mr. Gould: The debate has added to my anxieties. Amendment No. 199 specifies rules that could be made in respect of two types of return—a return under clause

7(5), which is clearly not the sort of return that we are talking about, because it relates to specific circumstances, and a periodic return, which is open to all the objections that hon. Members have spelt out. It is not clear to me what a periodic return is and why we should not simply talk about a return specific to each insolvency.
In any case, I am far from convinced that the Minister was right to be satisfied that there was no better way of handling the issue. I cannot see why it was not possible to provide that, having specified in clause 7(5) certain circumstances in which the liquidator must make a report forthwith, words such as "and in each other case shall make a report within two years on whether the directors involved conducted themselves properly" could not have been added. That would have included in the Bill the principle that we all regard as important and that should be given as much prominence as possible.

Mr. Hanley: Does the hon. Gentleman remember the contribution in Committee of my hon. Friend the Member for Tynemouth (Mr. Trotter) whose experience in insolvency matters was unrivalled? At our second sitting, my hon. Friend said that this issue was one of the rnost important practical matters to have been brought before the Committee up to that stage. My hon. Friend said that. although 95 to 98 per cent. of reports might have nothing to add, that was the basis of information that, after a repetition of "nothing to add" forms, might provide evidence of a suspicion of wrong behaviour. I am sure that if my hon. Friend the Member for Tynemouth were present today he would make as passionate a speech as he made in Committee. Unfortunately, he is absent on parliamentary business.

Mr. Gould: The hon. Gentleman is right. We all saw the importance of a mechanism by which a pattern of conduct could be identified and isolated.
The Minister would help the House if he expressed his understanding of our anxieties. I hope that the Minister will consider whether it is possible to put the provision in the Bill. I am confident that it is possible.

Mr. Fletcher: We agree that the liquidator shall report "forthwith". A report by the liquidator will be made in respect of every liquidation about the fitness of the directors. Part of our scheme is to keep on the database a record of those liquidators who make no returns. That is just a little help, but it might enable the Department over a period to say to a professional body that it is odd that Mr. X has been involved in 29 liquidations in the past 10 years but that no returns have been made. I know that the matter is not as simple as that, but since we plan a database that seems worthwhile.
I explain so that the House may understand that our intentions are more than honourable; they are practical. I spent some time considering whether it was possible to put this in the Bill, but for various reasons we decided to deal with the matter through the rules.

Mr. Norris: I am reassured by the spirited way in which my hon. Friend said that he intended to do what he said he would do, but I am concerned about the way in which he professes to have achieved that. I located amendment No. 259 in a long list, but I did not appreciate the true significance of amendment No. 199.

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. The hon. Gentleman must not make another speech.

Mr. Norris: I stand corrected, but I want to ask the Minister a specific question. Clause 7(5) states that if the conditions are satisfied, the liquidator shall make a report. The point about clause 7 is that the liquidator shall have to take a qualitative decision. The Committee took exception to that and surely it must be corrected. Amendment No. 199 does not do that.

Mr. Fletcher: I am not sure that I understand my hon. Friend. Clause 7(5) makes it clear that the liquidator shall forthwith report when he believes that a disqualification application shall be made. That is clear. The amendment requires the liquidator to make a report in all cases.

Mr. Gould: If a liquidator refuses to make a report, how will the Minister persuade him that he has a statutory obligation to make a report? Perhaps that is what the word "periodic" means. If so, it is an ill-chosen word.
None of us has any objection to making additional provision in the rules about keeping a data record of liquidators' actions. That does not preclude the Minister from putting the basic principle in clause 7.

Mr. Millan: The use of the expression "periodic returns" is causing difficulty, especially as clause 7 refers to individual reports and not "periodic" returns. There is a limit to what we can do at this late stage of the legislation. It might help us if the Under-Secretary of State said that it would be possible to amend amendment No. 199 in the other place to take care of some of these matters. It would be helpful if he said "I shall look again at amendment No. 199. Perhaps we have not got it right. It is misleading or confusing". As I did not have the benefit of hearing the Committee's discussions, I think that that would help to clear matters up, to some extent at least.

Mr. Bermingham: Will my right hon. Friend give way?

Mr. Deputy Speaker: Order. As I understand it, the right hon. Member for Glasgow, Govan (Mr. Millan) was intervening during the speech of the Under-Secretary of State. An hon. Member cannot intervene on an intervention. I thought that the Under-Secretary of State had not finished speaking.

Mr. Millan: The Under-Secretary of State has been up and down several times. I had not been on my feet until 30 seconds ago. I am not intervening.

Mr. Deputy Speaker: Order. As I understand it, the Under-Secretary of State was making his speech and had not finished, and the right hon. Member for Govan was intervening.

Mr. Millan: That was not my understanding, Mr. Deputy Speaker, and I do not think that it was the understanding of the Under-Secretary of State either. If my hon. Friend the Member for St. Helens, South (Mr. Bermingham) will simply put his case to me, I shall resume my seat in a few seconds.

Mr. Bermingham: Does my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) agree that the simplest solution would be to take out the words "periodic return" and insert the word "report"?

Mr. Millan: It would be. I suggested that the Under-Secretary of State might consider whether amendment No. 199 could be amended in the other place so that the wording is made clearer. If the hon. Gentleman does so, that might resolve some of our difficulties.

Mr. Fletcher: I do not think that there is anything wrong with amendment No. 199, but I shall certainly look at it again. If it needs to be amended, we shall do so in the other place, having described what we want to achieve.
On the more substantial point made by my hon. Friend the Member for Oxford, East (Mr. Norris) via the hon. Member for Dagenham (Mr. Gould), concern has been expressed about the power of the Secretary of State to ensure that the liquidator carries out this duty. That is provided for in clause 7(6).

Amendment agreed to.

Amendment made: No. 12, in page 5, line 32, at end insert—
`(4A) Except with the leave of the court, an application for the making under this section of a disqualification order against any person shall not be made after the end of the period of two years beginning with the day on which the company of which that person is or has been a director became insolvent.'.—[Mr. Fletcher.]

Orders of the Day — Insolvency Bill [Lords]

Clause 9

MATTERS FOR DETERMINING UNFITNESS OF DIRECTORS

Amendments made: No. 13, in page 7, line 31, leave out
'to the matters mentioned in Schedule 2 to this Act' and insert—

`(a) to the matters mentioned in Part I of Schedule 2 to this Act; and
(b) where the company has become insolvent, to the matters mentioned in Part II of that Schedule;'.

No. 14, in page 7, line 35, after first 'section' insert 'and Schedule 2 to this Act'.—[Mr. Fletcher.]

Clause 12

PERSONAL LIABILITY OF PERSONS ACTING WHILE DISQUALIFIED

Amendments made: No. 15, in page 9, line 18, after `order', insert
'of section [Restriction on use of company names] above'.

No. 16, in page 9, line 26, after 'order', insert
', to be in contravention in relation to that company of section [Restriction on use of company names] above'.

No. 17, in page 10, line 9, after 'order', insert
', to be in contravention in relation to that company of section [Restriction on use of company names] above'.—[Mr. Fletcher.]

Clause 21

POWER TO MAKE ORDER

Amendments made: No. 18, in page 16, line 33, leave out 'or'.

No. 19, in page 16, line 35, at end insert
'or
(c) where the company is a recognised bank or licensed institution within the meaning of the Banking Act 1979 or an institution to which sections 16 and 18 of that Act apply as if it were a licensed institution'.—[Mr. Fletcher.]

Mr. Gould: I beg to move amendment No. 271, in page 17, line 6, at end insert—
'(e) to secure greater protection for the jobs of those employed by the company than would be effected on a winding up.'.

Mr. Deputy Speaker: With this, we shall take the following:

Amendment 272: in clause 34, page 25, line 41, after 'creditors', insert
'and trade union and other representatives of the company's employees'.

Amendment 273, in page 26, line 2, after 'creditors', insert
'and trade union and other representatives of the company's employees'.

Amendment 274, in clause 35, page 26, line 15, leave out 'of creditors'.

Amendment 275, in clause 36, page 27, line 9, after 'creditors', insert
`and trade union and other representatives of the company's employees'.

Amendment 276, in page 27, line 13, after 'creditors', insert
'and trade union and other representatives of the company's employees'.

Amendment 277, in page 27, line 24, leave out 'of creditors'.

Amendment 278, in clause 37, in page 27, line 35, leave out 'of creditors'.

Amendment 279, in clause 38, page 28, line 4, after 'creditors', insert 'or employee'.

Amendment 280, in page 28, line 9, after 'creditors', insert 'or employees'.

Amendment 281, in page 28, line 10, after 'creditors', insert 'or employees'.

Amendment 282, in page 28, line 36, after 'creditors', insert 'or employees'.

Mr. Gould: We considered this group of amendments in Committee, and the Under-Secretary of State expressed some warmth about them. He undertook to consider them in a general sense. Predictably, he has not been able to accept the amendments, which were designed to impose upon the adminstrator the duty to pay some attention to the employment prospects of the work force in the company for which he was acting as liquidator. It imposed on hire the duty to consult the work force at a number of stages during the carrying out of his functions as administrator.
The fact that the Under-Secretary of State has not been able to accept the thrust of the amendments that we are left in the familiar position where the potential failure of a company is seen almost exclusively—in my view, wrongly—as a balance to be struck between the interests of the directors and the creditors. The employees, whose livelihood are most likely to be directly at stake, are regarded as a side issue and not a central matter to be taken into account by those responsible for the company's future. Their jobs are regarded as of very little value compared with the debts owed to creditors and the future of the company. The paradox is that the administration procedure is designed to maximise the chances of survival of the company. In that undertaking there can be no more important body of people than the work force. Its cooperation is essential. It needs to be taken into the confidence of the administrator at the earliest possible moment and to be kept in his confidence throughout.
The Opposition regret that, although he expressed general sympathy, the Under-Secretary of State found it impossible to express it directly in the Bill. I do not intend to press this amendment to a Division, but many people outside the House will take this failure to recognise the importance of the work force as another indication that in the end the Government do not concern themselves to much with the jobs of ordinary people and that they are quite content to leave this area of the law as a battleground between the directors of companies and those who in many cases are trade creditors, sight being lost of the interests of the work force.

Mr. Fletcher: I sympathise with the spirit of the amendments. I made that clear in Committee,. I cart envisage obvious political attractions in flagging up the requirement that the administrator should consult the work force. However, having considered this matter in the cold light of the Department as distinct from the warmth of the Committee it does not appear to be very helpful. Amendment No. 271 could be harmful. It could introduce a potential conflict between the purposes for which adminstrators are to be appointed.
There are two fundamental issues. First, the new administration procedure is intended to promote the


survival of companies as going concerns. Secondly, it is intended to secure the preservation of jobs. The purpose of amendment No. 271 is therefore implicit in all of the existing purposes for which administrators may be appointed. As for the remaining 11 amendments, the hon. Member for Dagenham (Mr. Gould) knows that my view is that no administration will be successful unless the administrator enjoys the support of the employees. To achieve this support he must consult them and keep them informed. There may be cases where the employees of a company will be creditors; they will then have the rights of creditors in terms of formal consultations with the administrator.
The central point that I wish to underline is that the success of the procedure is the best safeguard for employees' jobs and that, attractive though the amendments of the hon. Member for Dagenham are, they would not improve that safeguard. I cannot therefore agree to the inclusion of something which, although it might appear to be attractive politically, would not serve a real purpose or have any real effect.

Mr. Bermingham: Once again the Parliamentary Under-Secretary of State has proved that we were right. He warned us in Committee that we should not be too nice to him because it would harm his political career. Every time that we did our best to educate him he went back to his Department, of which we were highly critical. It poured cold water on this education and destroyed everything. The only thing to do is to move the Under-Secretary of State and to ignore the Department.
We are saying in the amendment that if there is any chance of saving a business the people we need to help us most are the employees; so why not put it on the face of the Bill? In Committee the Under-Secretary of State said that in theory it was a good and attractive idea and that he liked it. But what do we find when he returns to the Floor of the House? We find that the gremlins in the Department have got at him again. There seems to be an overwhelming objection on its part to anything sensible, humane and decent being put on the face of the Bill.
I said earlier that it is over 100 years since we had a Bill on insolvency. Joseph Chamberlain introduced the last one. It will be another 100 years before we have the next one. I fear that the gremlins in the Department in 100 years' time will again wreck the face of the Bill. We should be showing that it is the purpose of the insolvency law to save employment where we can, and that we think that the work force is important. That is not too much to ask.
The Minister says that it would be cosmetic and pretty. I say that it would be positive and attractive to the work force. It would show that this House believes that the people who work in industry are important, that their rights matter, that they will be protected, and that they will be given the courtesy of consultation. To achieve that, the Minister has only to bow gracefully to us—because he is at present some distance from the gremlins—in the warmth of this Chamber and accept the amendment. Then we can all go home thinking that he has done a fine job and finally overcome his own gremlins.

Mr. Gould: In the conviction that the arguments, if not the votes or the gremlins, are on our side, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 22

APPLICATION FOR ORDER

Mr. Fletcher: I beg to move amendment No. 20, in page 17, line 28, leave out 'charge or'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 23, 24, 26, 30, 32, 33, 35, 263, 37, 39 to 41, 50 to 56, 78, 102, 109, 115 to 117, 162, 163 and 167.

Mr. Fletcher: The 29 amendments in the group are drafting amendments which are designed to establish a single definition of what is meant by the term "security" in the Bill.

Amendment agreed to.

Mr. Fletcher: I beg to move amendment No. 21, in page 17, line 31, leave out 'or'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 22, 27, 28, 31, 34, 38, 42 to 44, 46, 47, 111 and 112.

Mr. Fletcher: The purpose of this group of 14 amendments is to adapt the provisions of the Bill relating to the administrative procedure so that wherever possible they are capable of operating in relation to Scotland without separate and distinct provisions having to be made.

Amendment agreed to.

Amendment made: No. 22, in page 17, line 32, after 'below', insert—
'or would be challengeable under section 615A or 615B of the 1985 Act or under any rule of law in Scotland.'.—[Mr.Fletcher.]

Clause 23

EFFECT OF APPLICATION

Amendments made: No. 23, in page 18, line 6, leave out 'charge on or'.

No. 24, in page 18, line 37, leave out 'shall be construed as references to diligence' and insert
'being commenced or continued shall include references to diligence being carried out or having effect and references to distress being levied shall be construed as references to poinding being carried out.'.—[Mr. Fletcher.]

Clause 24

NOTIFICATION OF ORDER

Amendments made: No. 25, in page 19, line 10, after 'no', insert 'other'.

No. 26, in page 19, line 10, leave out 'charge on or'.

No. 27, in page 19, line 31, leave out 'a charge on' and insert
'charged on and paid out of'.

No. 28, in page 19, line 32, leave out and shall have priority over any charges or' and insert
'in priority to any'.

No. 29, in page 19, line 33, leave out 'to which section 28(1) below then applies' and insert
'held by the person by or on whose behalf he was appointed'.—[Mr. Fletcher.]

Clause 28

POWER TO DEAL WITH CHARGED PROPERTY ETC.

Amendments made: No. 30, in page 21, line 3, leave 'charge or'.

No. 31, in page 21. leave out lines 5 to 8 and insert 'security'.

No. 32, in page 21, line 12, leave out 'charge or'.

No. 33, in page 21, line 19, leave out 'charge or'.

No. 34, in page 21, line 23, leave out
'charge or security held by a person who'

and insert
`security held by a person who (whether by virtue of the security or otherwise) appointed or'.

No. 35, in page 21, line 26, leave out
'charge or security to which a charge or'
and insert 'security to which a'.

No. 263, in page 21, line 28, leave out 'charge or security on' and insert
'security which, as created, was a security over'.

No. 37, in page 21. line 29, leave out 'charge or'.

No. 38, in page 21, line 30, at end insert—
`(3A) Where any property is disposed of under subsection (1) above, the security shall have effect in relation to any property of the company which represents the property disposed of as if—
(a) the security had been created by the company as a floating charge over the property; and
(b) any condition precedent to the exercise of the right to appoint a receiver of the property by virtue of the security were satisfied.'.

No. 39, in page 21, line 40, leave out 'charge or'.

No. 40, in page 21, line 43, leave out 'charges or'.

No. 41, in page 22, line 2, leave out 'charges or'.

No. 42, in page 22, line 10, at end insert—
'(7A) Where any property is disposed of under this section in its application to Scotland, the administrator shall grant to the disponee an appropriate document of transfer or conveyance of the property, and—
(a) that document; or
(b) where any recording, intimation or registration of that document is a legal requirement for completion of title to the property, that recording, intimation or registration,
has the effect of disencumbering the property of or, as the case may be, freeing the property from the security.'—[Mr. Fletcher.]

Clause 31

VACATION OF OFFICE AND RELEASE

Amendments made: No. 43, in page 23, line 26, leave out 'a charge on' and insert
`charged on and paid out of'.

No. 44, in page 23, line 28, leave out
`and shall have priority over any charge or'
and insert 'in priority to any'.

No. 45, in page 23, line 31, leave out from 'incurred' to `functions' in line 32 and insert
'while he was administrator under contracts entered into or contracts of employment adopted by him or a predecessor of his in the carrying out of his or the predecessor's'.

No. 46, in page 23, line 33, leave out 'a charge on' and insert
'charged on and paid out of.

No. 47, in page 23, line 34, leave out
'and shall have priority over'
and insert 'in priority to'.

No. 48, in page 23, line 35, at end insert
'; and for the purposes of paragraph (b) above the administrator is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment.'.—[Mr. Fletcher.]

Clause 39

PRELIMINARY

Amendment made: No. 49, in page 29, line 18, leave out from first 'a' to 'or' in line 19 and insert
'charge which, as created, was a floating charge, or by such a charge and one or more other securities'.—[Mr. Fletcher.]

Clause 43

POWER TO DISPOSE OF CHARGED PROPERTY ETC.

Amendments made: No. 50, in page 30, line 28, leave out 'charge or'.

No. 51, in page 30, line 33, leave out 'charge or'.

No. 52, in page 30, line 35, leave out 'charge or'.

No. 53, in page 30, line 37, leave out
`charge or security to which a charge or'
and insert 'security to which a'.

No. 54, in page 31, line 4, leave out 'charge or'.

No. 55, in page 31, line 6, leave out 'charges or'.

No. 56, in page 31. line 10, leave out 'charges or'.—[Mr. Fletcher]

Clause 44

AGENCY AND LIABILITY FOR CONTRACTS

Amendments made: No. 57, in page 31, line 28, leave out from beginning to
'and' in line 30 and insert 'by him in the carrying out of his functions (except in so far as the contract otherwise provides) and on any contract of employment adopted by him in the carrying out of those functions;'.

No. 58, in page 31, line 32, at end insert
'; and for the purposes of paragraph (b)above the administrative receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment.'.

No. 59, in page 31, line 33, leave out subsections (2) and (3) and insert—
`(2) This section does not limit any right to indemnity which the administrative receiver would have apart from it, nor limit his liability on contracts entered or adopted without authority., nor confer any right to indemnity in respect of that liability.'.—[Mr. Fletcher.]

Clause 45

VACATION OF OFFICE

Amendments made: No. 60, in page 32, line 13, leave out 'a charge on' and insert 'charged on and paid out of'.

No. 61, in page 32, line 14, leave out 'and shall have priority over any charge or' and insert 'in priority to any'.

No. 62, in page 32, line 15, leave out
'to which section 43(2) above then applies

and insert
`held by the person by or on whose behalf he was appointed'.—[Mr. Fletcher.]

Clause 51

POWERS OF RECEIVER

Amendments made: No. 264, in page 36, line 32, at end insert—
'(aa)in paragraph (c)of subsection (1), after the word "to" there shall be inserted the words "raise or".'

No. 265, in page 36, line 33, leave out 'subsection (1)' and insert 'that subsection'.

No. 64, in page 37, line 18, at end insert—


`(ee)after paragraph (r)there shall be inserted the following paragraph—
(rr) power to change the situation of the company's registered office; ";'.—[Mr. Fletcher.]

Clause 52

VACATION OF APPOINTMENT BY RECEIVER

Amendments made:

No. 65, in page 37, line 24, leave out from beginning to 'for' in line 25 and insert—
'52(1) Section 478 of the 1985 Act (vacation of appointment by receiver) shall be amended as follows.
(2)'.

No. 66, in page 37, line 34, at end insert—
'(3) For subsection (4) there shall be substituted the following subsection—
(4) Where at any time a receiver vacates office—
(a) his remuneration and any expenses properly incurred by him; and
(b) indemnity to which he is entitled out of the property of the company, shall be paid out of the property of the company which is subject to the floating charge and shall have priority as provided for in section 476(1).".

(4) In subsection (5) for the words "7 days" there shall be substituted the words "14 days".'. [Mr. Fletcher]

Clause 53

POWERS OF COURT

Amendment made: No. 67, in page 38, line 3, after 'invalid', insert
'(whether by virtue of the invalidity of the instrument or otherwise)'.—[Mr. Fletcher.]

CLause 54

INFORMATION TO BE GIVEN BY AND TO RECEIVER

Amendments made: No. 68, in page 38, line 12, leave out '14' and insert '28'.

No. 69, in page 38, leave out lines 16 to 23.

No. 70, in page 38, line 24, leave out 'does' and insert 'and section 482 do'.

No. 71, in page 38, line 28, leave out 'it applies' and insert 'they apply'.

No. 72, in page 38, line 29, leave out 'it has' and insert 'they have'.

No. 73, in page 38, line 30, after 'section', insert 'and section 482'.—[Mr. Fletcher.]

Clause 55

COMPANY'S STATEMENT OF AFFAIRS

Amendment made: No. 74, in page 39, line 3, leave out from beginning to end of line 4 on page 40 and insert—

'482.—(1) Where a receiver of a company is appointed, the receiver shall forthwith require some or all of the persons mentioned in subsection (3) below to make out and submit to him a statement in the prescribed form as to the affairs of the company.

(2) A statement submitted under this section shall be verified by affidavit by the persons required to submit it and shall show—
(a) particulars of the company's assets, debts and liabilities;
(b) the names and addresses of its creditors;
(c) the securities held by them respectively;

(d) the dates when the securities were respectively given; and
(e) such further or other information as may be prescribed.

(3) The persons referred to in subsection (1) above are—
(a) those who are or have been officers of the company;
(b) those who have taken part in the company's formation at any time within one year before the date of the appointment of the receiver;
(c) those who are in the company's employment, or have been in its employment within that year, and are in the receiver's opinion capable of giving the information required;
(d) those who are or have been within that year officers of or in the employment of a company which is, or within that year was, an officer of the company;
and in this subsection "employment" includes employment under a contract for services.

(4) Where any persons are required under this section to submit a statement of affairs to the receiver they shall do so (subject to subsection (5) below) before the end of the period of 21 days beginning with the day after that on which the prescribed notice of the requirement is given to them by the receiver.

(5) The receiver, if he thinks fit, may—
(a) at any time release a person from an obligation imposed on him under subsection (1) or (2) above; or
(b) either when giving the notice mentioned in subsection (4) above or subsequently extend the period so mentioned,
and where the receiver has refused to exercise a power conferred by this subsection, the court, if it thinks fit, may exercise it.

(6) If a person without reasonable excuse fails to comply with any obligation imposed under this section, he shall be liable to a fine and, for continued contravention, to a daily default fine.'.—[Mr. Fletcher.]

Clause 56

REPORT BY RECEIVER

Amendments made: No. 75, in page 40, line 16, at end insert
`so far as he is aware of them'.

No 76, in page 41, line 24, leave out '481' and insert '482'.

No. 77, in page 41, line 25, at end insert—
'(5A) Nothing in this section shall be taken as requiring any such report to include any information the disclosure of which would seriously prejudice the carrying out by the receiver of his functions'.

No. 78, in page 41, line 31, leave out 'whose debt is secured on assets' and insert
'who holds in respect of his debt a security over property'.—[Mr. Fletcher.]

Clause 57

COMMITTEE OF CREDITORS

Amendments made: No. 79, in page 41, line 41, leave out 'at any time' and insert
'on giving not less than 7 days notice'.

No. 80, in page 41, line 42, after first 'it', insert
'at any reasonable time'.—[Mr. Fletcher.]

Clause 62

FUNCTIONS OF OFFICIAL RECEIVER IN RELATION TO OFFICE OF LIQUIDATOR

Amendment made: No. 81, in page 46, line 2, leave out 'one-half' and insert 'one-quarter'.—[Mr. Fletcher.]

Clause 63

APPOINTMENT OF LIQUIDATOR IN SCOTLAND.

Amendment made: No. 82, in page 47, line 2, after
`person', insert
`(who may be the person who is the interim liquidator)'.— [Mr. Fletcher.]

Clause 66

COMMITTEE OF CREDITORS ETC. IN ENGLAND AND WALES

Amendment made: No. 83, in page 48, line 12, at end insert
'; and the liquidator of a company who is not the official receiver shall summon such a meeting if he is requested, in accordance with the rules, to do so by one-tenth, in value, of the company's creditors. '. '—[Mr. Fletcher.]

Clause 69

EARLY DISSOLUTION OF COMPANY IN SCOTLAND

Amendments made:No. 84, in page 51, line 9, leave out from 'dissolved' to end of line 10 and insert
'in accordance with this section.'

No. 85, in page 51, line 13, leave out from 'shall' to end and insert
'forthwith register it and, at the end of the period of three months beginning with the day of its registration, the company shall be dissolved.'.

No. 86, in page 51, line 13, at end insert—
`(3A) The court may, on an application by any person who appears to the court to have an interest, order that the date at which the dissolution of the company is to take effect shall be deferred for such period as the court thinks fit.
(3B) It is the duty of the person on whose application an order is made under subsection (3A) above, within seven days after the making of the order, to deliver to the registrar of companies such a copy of the order as is prescribed.'.

No. 87, in page 51, line 18, at end insert—
'(5) If a person without reasonable excuse fails to deliver a copy as required by subsection (3B) above, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum, and for continued contravention, to a daily default fine not exceeding one-fiftieth of the statutory maximum.'.—[Mr. Fletcher.]

Clause 71

REMOVAL OF LIQUIDATOR AND VACATION OF OFFICE.

Amendments made: No. 88, in page 52, line 16, leave out 'one-half and insert 'one-quarter'.

No. 89, in page 52, line 28, leave out 'forthwith vacate office' and insert
`vacate office when the dissolution of the company takes effect in accordance with that section'.—[Mr. Fletcher.]

Clause 72

RELEASE OF LIQUIDATOR

Amendment made: No. 90, in page 54, line 2, at end insert—
'(7) In the application of this section to a case where the order for winding up has been made by the court in Scotland, the references to a determination by the Secretary of State as to the time from which a person who has ceased to be liquidator shall have his release shall be construed as references to such a determination by the Accountant of Court.'.—[Mr. Fletcher.]

Clause 73

DISSOLUTION OF COMPANY

Amendments made: No. 91, in page 54, line 7, leave out 'subsection (2)' and insert 'subsections (2) and (3A)'.

No. 92, in page 54, line 17, at end insert—
'(3A) Subsection (2) above shall not apply in a case where the winding-up order was made by the court in Scotland, but in such a case the court may, on an application by any person appearing to the court to have an interest, order that the date at which the dissolution of the company is to take effect shall be deferred for such period as the court thinks fit.'.

No. 93, in page 54, line 19, leave out 'or'.

No. 94, in page 54, line 21, after 'determined', insert
'or on whose application an order is made under subsection (3A) above'

No. 95, in page 54, line 22, leave out 'or'.

No. '96, in page 54, line 22, after 'appeal', insert
'or the making of the order'.

No. 97, in page 54, line 23, leave out 'or determination' and insert 'determination or order'.—[Mr. Fletcher.]

Clause 75

EFFECT OF INSOLVENCY ON MEMBERS' VOLUNTARY WINDING UP

Amendments made: No. 98, in page 56, line 12, leave out from 'the' to 'and' in line 13 and insert
'directors' declaration under section 577 of that Act had not been made'.

No. 99, in page 56, line 18, after 'accordingly,' insert
'the winding up shall become a creditors' voluntary winding up and'.—[Mr. Fletcher.]

Clause 77

MEETING OF CREDITORS IN CREDITORS' VOLUNTARY WINDING UP

Amendment made: No. 100, in page 58, line 3, after 'practitioner' insert
`in relation to the company'—[Mr. Fletcher.]

Clause 79

RELEASE OF LIQUIDATOR IN VOLUNTARY WINDING UP

Amendment made: No. 101, in page 60, line 42, at end insert—
'(2A) In the application of subsection (2) above to the winding up of a company registered in Scotland, the references to a determination by the Secretary of State as to the time from which a person who has ceased to be liquidator shall have his release shall be construed as references to such a determination by the Accountant of Court' —[Mr. Fletcher.]

Clause 81

PREFERENTIAL DEBTS

Amendment made: No. 102, in page 61, line 23, leave out 'under (and, in Scotland' and insert 'secured by, or'.—[Mr. Fletcher.]

Clause 86

NAME CHANGES

Amendment made: No. 103, in page 66, line 1, leave out clause 86.—[Mr. Fletcher.]

Clause 88

PRELIMINARY

Amendment made: No. 104, in page 67, line 32, at end insert—
'(3) Section 90 below shall apply where a composition or scheme approved by meetings summoned under section 16 above has taken effect as it applies where a company goes into liquidation as if references in that section to the officer holder were references to the supervisor of the composition or scheme —[Mr. Fletcher.]

Clause 90

SUPPLIES BY UTILITIES

Amendments made: No. 105, in page 69, line 2, leave out 'and'.

No. 106, in page 69, line 4, at end insert
'and
(e) the date on which the composition or scheme was approved by the meetings summoned under section 16 above.'.—[Mr. Fletcher.]

Clause 94

TRANSACTIONS AT AN UNDERVALUE AND PREFERENCES (ENGLAND AND WALES)

Amendments made: No. 107, in page 73, leave out lines 13 to 25 and insert—
'(8) Subject to subsection (8A) below, the time at which a company enters into a transaction at an undervalue or gives a preference is a relevant time for the purposes of this section if the transaction is entered into or the preference is given—
(a) in the case of a transaction at an undervalue or of a preference which is given to a person who is connected with the company, at a time in the period of two years ending with the commencement date; or
(b) in the case of a preference which is not such a transaction and is not so given, at a time in the period of six months ending with that date; or
(c) in either case, at a time between the presentation of a petition for the making of an administration order in relation to the company and the making of such an order on that petition.

(8A) Where a company enters into a transaction at an undervalue or gives a preference at a time mentioned in subsection 8(a) or (b) above,that time shall not be a relevant time for the purposes of this section unless the company—
(a) is unable to pay its debts within the meaning of section 518 of the 1985 Act at that time; or
(b)becomes unable to pay its debts within the meaning of that section in consequence of the transaction or preference;
but the requirements of this subsection shall be presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by a company with a person who is connected with the company.'

No. 108, in page 73, line 37, leave out from beginning to end of line 3 on page 74.—[Mr. Fletcher.]

Clause 95

ORDERS UNDER S. 94

Amendment made: No. 109, in page 74, line 15, leave out 'charge or'.—[Mr. Fletcher.]

Clause 97

AVOIDANCE OF CERTAIN FLOATING CHARGES

Amendments made: No. 110, in page 76, line 38. leave out from beginning to end of line 16 on page 77 and insert—
'(2) Subject to subsection (3) below, the time at which a floating charge is created by a company is a relevant time for the purposes of this section if the charge is created—
(a) in the case of a charge which is created in favour of a person who is connected with the company, at a time in the period of two years ending with the commencement date;
(b) in the case of a charge which is created in favour of any other person, at a time in the period of twelve months ending with that date; or
(c) in either case, at a time between the presentation of a petition for the making of an adminstration order in relation to the company and the making of such an order on that petition.

(3) Where a company creates a floating charge at a time mentioned in subsection (2)(b) above and the person in favour of whom the charge is created is not connected with the company, that time shall not be a relevant time for the purposes of this section unless the company—
(a) is unable to pay its debts within the meaning of section 518 of the 1985 Act at that time; or
(b) becomes unable to pay its debts within the meaning of that section in consequence of the transaction under which the charge is created.

(3A) For the purposes of subsection (2) above the commencement date is—
(a) in a case where this section applies by reason of the making of an administration order, the date of the presentation of the petition on which the order was made; and
(b) in a case where this section applies by reason of a company's going into liquidation the date of the commencment of the winding up.'.

No. 111, in page 77, line 24, leave out subsection (5).—[Mr. Fletcher.]

Clause 101

CONSTRUCTION OF PART II

Amendments made: No. 266, in page 79, line 15, leave out 'preceding'.

No. 112, in page 79, line 42, at end insert—
'in a case where the whole (or substantially the whole) of the company's property is attached by the floating charge'.

No. 113, in page 80, line 6, at end insert—
'"floating charge" means a charge which, as created, was a floating charge

No. 114, in page 80, line 10, at end insert—
'"office copy" in relation to Scotland, means a copy certified by the clerk of court; '.

No. 115, in page 80, line 28, leave out
'whose debt is charged or secured on assets'
and insert
'who holds in respect of his debt a security over property'.

No. 116, in page 80, line 30, at end insert—
security" means—
(a)in relation to England and Wales. any mortgage, charge, lien or other security;


(b) in relation to Scotland, any security (whether heritable or moveable), any floating charge and any right of lien, retention or preference;'.

No. 117, in page 80, line 31. leave out subsection (4).

Clause 113

CREDITOR'S PETITION

Amendment proposed: No. 118, in page 91, line 15, leave out 'them' and insert 'the debts'.—[Mr. Fletcher.]

Mr. Deputy Speaker: With this we shall consider Government amendments Nos. 119 to 121.

Mr. Bermingham: Amendment No. 121 would appear to make it impossible to present a bankruptcy petition as long as there is an outstanding application to set aside the statutory demand.
Should there not simply be a power to restrain the presentation of a petition when such an application is considered by the court to be genuine?

Mr. Fletcher: These amendments provide an extra condition before a creditor may present his petition against the debtor so that as well as having to exceed the bankruptcy level the petition may be presented only when the debt or debts are a liquidated sum, the debtor has no reasonable prospect of being able to pay the debt or debts and the court is not dealing with an application to set aside the demand. The last condition will ensure that when a debtor has applied to have a demand set aside—perhaps because the amount of the debt outstanding is being disputed—the creditor may not present a bankruptcy petition.

Amendment agreed to.

Amendments made: No. 119, in page 91, line 18, leave out second 'and '.

No. 120, in page 91, line 19, leave out 'them' and insert 'the debts'.

No. 121, in page 91. line 21, at end insert
'and (d) there is no outstanding application to set aside a demand served for the purposes of subsection (3)(a) or (4) below in respect of the debt or any of the debts.'.—[Mr. Fletcher.]

Clause 116

PROCEEDINGS ON DEBTOR'S PETITION

Amendments made: No. 122, in page 94, line 10, leave out 'and'.

No. 123, in page 94, line 15, at end insert
`and (d) that it would be appropriate to appoint a person to prepare a report under subsection (3) below'.

No. 124, in page 94, line 17, leave out `(c)' and insert
`(d)'.

No. 125, in page 94, line 18, leave out 'may' and insert `shall'.—[Mr. Fletcher.]

Clause 121

POWER TO APPOINT INTERIM RECEIVER

Amendments made: No. 126, in page 98, line 3, leave out from `not' to end of line 7 and insert
'release a bankrupt from any liability in respect of a fine or other penalty imposed for an offence or from any liability under a recognisance except, in the case of a penalty imposed for an offence under any enactment relating to the public revenue or of a recognisance, with the consent of the Treasury.'.

No. 127, in page 98, line 16, at end insert—

'(5A) Discharge from bankruptcy shall not release a bankrupt from such other bankruptcy depts., not being debts provable in his bankruptcy, as are prescribed.'.—[Mr. Fletcher.]

Clause 123

DEFINITION OF BANKRUPT'S ESTATE

11 pm

Mr. Gould: I beg to move amendment No. 283, in page 100, line 3, at end insert—
`(c) The bankrupt's only or main residence which is:
(i) a protected tenancy or restricted contract as defined in the Rent Act 1977;
(ii) a protected occupancy as defined in the Rent (Agriculture) Act 1976; or
(iii) a secure tenancy as defined in the Housing Act 1980 unless it is a tenancy to which Part II of the Landlord and Tenant Act 1954 applies."

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 140 to 147.

Mr. Gould: In Committee I mentioned the problem of the family home when the bankrupt—to take the most obvious example—was a council tenant. Under the existing law, the tenancy would vest in the trustee, but for no purpose. The only consequence of that would be that in many cases the bankrupt's family would lose its family home without a corresponding gain to the creditors.
The Minister kindly said that he understood my anxiety and undertook to try to do something about it, and he has tabled amendments Nos. 140 to 147, which are welcome so far as they go. I believe that the Minister has fulfilled his undertaking to try to find a solution to the problem. However, I wonder whether he could be prevailed upon to go a little further. The problem is that in each case the tenancies will still vest in the trustee, although in most cases the tenancy will be of no value.
The trustee or the official receiver may then disclaim the tenancy under clause 154. That will improve the tenant's position, but many tenants will not understand what is going on unless they receive clear notice of the disclaimer. In many cases they will not have proper advice. They may not be able or ready to act within the 14 days that they are given. There is a grave danger that, merely because many of the people about whom we are worried will not have access to proper advice and will be completely confused by being caught up in the proceedings, they will lose their homes for no good reason.
I ask the Minister whether he considered, and, if so, what was the outcome of his consideration, if it were possible to prevent the vesting of the tenancy in some defined circumstances. That would be a neater and more foolproof solution to the problem. That is what amendment No. 283 is designed to achieve.
I am advised that there may be a serious technical problem with the amendment, but if the Minister does not take that seriously I wonder whether he would accept in principle that it may be a better approach and may meet the point that we both want to achieve.

Mr. Fletcher: The difficulty is that if a blanket exemption were provided for all tenancies there would have to be a reserve power to enable trustees to claim tenancies which were of value to the estate.
As a third party—the landlord—would be involved, the claiming would have to be done through the court. That


could involve considerable trouble for the trustee and expense to the estate. We do not have evidence that a substantial number of people suffer hardship under the present system sufficient to justify a radical change such as the hon. Member for Dagenham (Mr. Gould) suggests. We must also remember that he said that people involved in this matter may not always have the benefit of proper advice. Bearing that in mind, we cannot avoid the fact that the tenancy may be of value to the estate and that there is a third party involved.

Mr. Gould: I am a little worried about the Minister's point that not many people are involved. We do not know how many people may be involved, but if a technically satisfactory solution could be arrived at, surely it would be worth helping a handful of people. I am not convinced that the numbers are material. The Minister should consider whether it is possible to find a satisfactory solution which would avoid hardship for the families of some bankrupts.

Mr. Fletcher: I agree that there may be some hardship, but there is no evidence available and I do not believe that the fact that there were many such cases was brought out elsewhere. I do not think that there is sufficient evidence to justify the blanket exemption that the hon. Member suggests.

Mr. Gould: The Housing Aid Trust which has advised me on this matter believes that it is serious. I imagine that it would be happy to provide the Minister with the evidence. I wonder whether the Minister would reconsider the matter in the light of any evidence that that organisation provided. On that understanding, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 128, in page 100, line 20 leave out 'is so exercisable'.

No. 129, in page 100, line 21 after `(a)', insert 'is so exercisable'.

No. 130, in page 100, line 25 leave out
'exclusively for the benefit of a person other than' and insert 'cannot be so exercised for the benefit of'

No. 131, in page 100, line 29 leave out from `time' to
`(whether' in line 30 and insert 'of the transaction or event by virtue of which it is exercisable by that person'.—[Mr.
Fletcher.]

Clause 134

POWER OF CREDITORS TO REQUIRE MEETING TO BE SUMMONED

Amendment made: No. 132, in page 108. line 25 leave out 'one-half' and insert 'one-quarter'.—[Mr. Fletcher.]

Clause 136

APPOINTMENT OF TRUSTEE BY SECRETARY OF STATE

Amendment made: No. 133, in page 109, line 33 leave out `that section' and insert `this Part'.—[Mr. Fletcher.]

Clause 137

SPECIAL CASES

Amendment made: No. 134, in page 110, line 26 leave out `that section and insert 'this Part'.—[Mr. Fletcher.]

Clause 138

REMOVAL OF TRUSTEE AND VACATION OF OFFICE

Amendment made: No. 135, in page 111, line 3 leave out 'one-half and insert `one-quarter'.—[Mr. Fletcher.]

Clause 150

ACQUISITION BY TRUSTEE OF CONTROL

Amendment made: No. 136, in page 119, line 14 at end insert
`; but notice of the deemed assignment shall not be required to be given except in so far as it is necessary, in a case where the deemed assignment is from the bankrupt himself, for protecting the priority of the trustee.'.—[Mr. Fletcher.]

Clause 152

CHARGE ON PRINCIPAL RESIDENCE

Amendments made: No. 137, in page 120, line 10 leave out
'the principal residence of the bankrupt or of'
and insert
a dwelling house which is occupied by the bankrupt or by'.
No. 138, in page 120, line 12 after 'unable' insert 'for the time being'.—[Mr. Fletcher.]

Clause 153

GENERAL POWERS OF TRUSTEE

Amendment made: No. 139, in page 122, line 23 after `and', insert
in respect of the bankrupt's estate, on'.—[Mr. Fletcher.]

Clause 154

POWER TO DISCLAIM ONEROUS PROPERTY

Amendment made: No. 140, in page 124, line 14 at end insert—
'(7A) Without prejudice to subsection (6) above, the disclaimer of any property in a dwelling house shall not take effect unless a copy of the disclaimer has been served (so far as the trustee is aware of their addresses) on every person in occupation of or claiming a right to occupy the dwelling house and either—



(a) no application under section 155 below is made with respect to that property before the end of the period of fourteen days beginning with the day on which the last notice served under this subsection was served; or
(b)where such an application has been made, the court directs that the disclaimer shall take effect.'.—[Mr. Fletcher.]

Clause 155

POWERS OF COURT IN RESPECT OF DISCLAIMED PROPERTY

Amendments made: No. 141, in page 124, line 35 leave out 'or'.

No. 142, in page 124, line 38 at end insert
`or
(c) where the disclaimed property is property in a dwelling house, any person in occupation of or claiming a right to occupy the dwelling house.'.

No. 143, in page 124, line 44 leave out 'or'

No. 144, in page 125, line 2 at end insert
`or
(c) where the disclaimed property is property in a dwelling house, any person in occupation of or entitled to occupy the dwelling house.'.

No. 145, in page 125, line 8 leave out
`claiming under the bankrupt as underlessee or mortgagee'.

No. 146, in page 125, line 21 leave out
'claiming under the bankrupt as underlessee or mortgagee'.

No. 147, in page 125, line 32 leave out from 'person' to 'declines' in line 33.—[Mr. Fletcher.]

Clause 157

MUTUAL CREDIT AND SET OFF

Mr. Fletcher: I beg to move amendment No. 148, in page 126, line 26 at end insert—
'(2A) Sums clue from the bankrupt to another party shall not be included in the account taken under subsection (2) above if that other party had notice at the time they became due that a bankruptcy petition relating to the bankrupt was pending.'.
This amendment creates an exception to clause 157(2) of the Bill and re-enacts, in terms appropriately modified to take account of the abolition of acts of bankruptcy by the Bill, the exception currently contained in section 31 of the Bankruptcy Act 1914. It has been represented to us that abuse against the concept of equality of treatment of creditors could occur if the relevant part of section 31 of the 1914 Act is not re-enacted. We agree with this.

Mr. Bermingham: Although I welcome this amendment as a step in the right direction it seems that the gremlins have begun on the right road. Unfortunately, they did not follow the tram tracks to the end of the tunnel. This is exactly the same case with regard to preference. If one knows that someone is going bankrupt, there are ways to gain preference. This good amendment seeks to guard against that happening, but the same thing can happen in company liquidations, deeds of assessment, voluntary arrangements and receiverships. I merely ask the Minister to take on board what I, and practitioners who have advised me, say: having got onto the right tracks, perhaps he would push the train a little further down so as to remove the preference in all other liquidations and receiverships.

Amendment agreed to

Clause 161

FINAL MEETING

Amendment made: No.149, in page 129, line 1, leave out
'the principal residence of the bankrupt or of'

and insert
' a dwelling house which is occupied by the bankrupt or by;—[Mr. Fletcher.]

Clause 164

TRANSACTIONS AT AN UNDERVALUE AND PREFERENCES

Amendments made: No. 150, in page 133, line 25, leave out subsection (7) and insert—
'(7) Subject to subsections (7A) and (9) below, the time at which an individual enters into a transaction at an undervalue or gives a preference is a relevant time for the purposes of this section if the transaction is entered into or the preference is given—

(a)in the case of a transaction at an undervalue, at a time in the period of five years ending with the day of the presentation of the bankruptcy petition on which that individual is adjudged bankrupt;
(b)in the case of a preference which is not a transaction at an undervalue and is given to a person who is an associate of that individual, at a time in the period of two years ending with that day; and
(c)in any other case of a preference which is not a transaction at an undervalue, at a time in the period of six months ending with that day; and

(7A) Where an individual enters into a transaction at an undervalue or gives a preference at a time mentioned in paragraph (a) or (b)  of subsection (7) above, not being, in the case of a transaction at an undervalue, a time less than two years before the end of the period mentioned in the said paragraph (a), that time shall not be a relevant time for the purposes of this section unless the individual—
(a)is insolvent at that time; or
(b)becomes insolvent in consequence of the transaction or preference;
but the requirements of this subsection shall be presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by an individual with a person who is an associate of his.'.

No. 151, in page 133, line 43 leave out from 'if' to end of line 12 on page 134, and insert—

(a) he is unable to pay his debts as they fall due; or
(b)the value of his assets is less than the amount of his liabilities, taking into account his contingent and prospective liabilities.

(9) A transaction entered into or preference given by a person who is subsequently adjudged bankrupt on a petition under section 112(1)(d) above shall be treated as having been entered into or given at a relevant time for the purposes of this section if it was entered into or given at any time on or after the date specified for the purposes of this subsection in the criminal bankruptcy order on which the petition was based.'.—[Mr. Fletcher.]

Clause 169

EFFECT OF BANKRUPTCY ON ENFORCEMENT PROCEDURES

Amendments made: No. 152, in page 138, line 7 leave out 'served on' and insert 'given to'.

No. 153, in page 139, line 19 leave out subsection (8) and insert—
'(8) Neither subsection (2) nor subsection (3) above shall apply in relation to any execution against property which has been acquired by or has devolved upon the bankrupt since the commencement of the bankruptcy unless, at the time the execution is issued or before it is completed—

(a) the property has been or is claimed for the bankrupt's estate under section 147 above; and


(b) a copy of the notice given under that section has been or is served on the sheriff or other officer charged with the execution.'.—[Mr. Fletcher.]

Clause 177

FRAUDULENT DISPOSAL ETC. OF PROPERTY

Amendment made: No. 154, in page 145, line 10 after 'causes', insert `to be made'.—[Mr. Fletcher.]

Clause 181

GAMBLING

Amendments made: No. 155, in page 147, line 38 leave out from beginning to 'in' in line 43 and insert
'The bankrupt shall be guilty of an offence if he has—
(a)

No. 156, in page 148, line 1 leave out from `speculations' to 'between' in line 3 and insert 'or
(b)

No. 157, in page 148, line 5 leave out 'such gambling or' and insert
'gambling or by rash and hazardous'.—[Mr. Fletcher.]

Clause 182

PENALTIES

Amendment made: No. 158, in page 148, line 19 after `179(1)' insert 'or (3)'.—[Mr. Fletcher.]

Clause 193

APPEALS ETC. FROM COURTS EXERCISING INSOLVENCY JURISDICTION

Amendment made: No. 159, in page 156, line 21 leave out from second 'Appeal' to end of line 25

Clause 194

ASSISTANCE FOR OTHER COURTS IN INSOLVENCY MATTERS

No. 160, in page 156, line 31, leave out clause 194.

Clause 202

INTERPRETATION OF PART III

Amendments made: No. 161, in page 160, line 27 at end insert—
'"dwelling house" includes any building or part of a building which is occupied as a dwelling and any yard, garden, garage or outhouse belonging to the dwelling house and occupied with it;'.

No. 162, in page 161, line 15 leave out
'as security for the debt a mortgage, charge or lien on'

and insert
'any security for the debt (whether a mortgage, charge, lien or other security) over'.

No. 163, in page 161, line 23 leave out 'lien' and insert `security'.—[Mr. Fletcher.]

Clause 203

TRANSACTIONS DEFRAUDING CREDITORS

Mr. Fletcher: I beg to move amendment No. 164, in page 162, line 4 leave out
'that is being wound up'
and insert
'which is being wound up or in relation to which an administration order is in force'.

Mr. Deputy Speaker: With this, it will be convenient to discuss Government amendments Nos. 165 and 166.

Mr. Fletcher: In moving these amendments. I am indebted to the hon. Member for Dagenham (Mr. Gould) and my hon. Friend the Member for Tynemouth (Mr. Trotter), who moved similar amendments in respect of voluntary arrangements in Committee. This action confirmed the views that had been expressed to us by representatives of the main accounting bodies that a supervisor of a voluntary arrangement, whether individual or corporate, and an administrator should enjoy similar powers to those enjoyed by a trustee or liquidator in attacking transactions which have reduced the value of assets available for creditors and others. The amendments will achieve that aim, and I commend them to the House.

Amendment agreed to.

Amendments made: No. 165, in page 162. line 6, after `liquidator', insert 'or administrator'.

No. 166, in page 162, line 8, leave out from `transaction' to end of line 13 and insert—
'(b) in a case where a person who is, or is capable of being, prejudiced by the transaction is bound by a composition or scheme approved under Chapter II of Part II or Chapter I of Part III of this Act, by the supervisor of the composition or scheme or by any person who (whether or not so bound) is, or is capable of being, so prejudiced; or
(c)in any other case, by a person who is, or in capable of being, so prejudiced;
and an application made under any of the preceding paragraphs in relation to a transaction shall be treated as made on behalf of every person who is, or is capable of being, prejudiced by the transaction.'.

No. 260, in page 163, line 9, leave out 'individual in question' and insert 'relevant person'.

No. 167, in page 163, line 30, at end insert—
'"security" means any mortgage, charge, lien or other security.'

No. 168, in page 163, line 31, leave out subsection (8).—[Mr. Fletcher.]

Clause 207

AMENDMENTS OF EMPLOYMENT PROTECTION (CONSOLIDATION) ACT 1978

Amendment made: No. 169, in page 167, line 22, after 'under', insert 'Chapter II of Part II or'.—[Mr. Fletcher.]

Clause 208

AMENDMENTS OF BANKING ACT 1979

Amendments made: No. 170. in page 167, line 24, leave out 'In section 18(1)' and insert
'For subsections (1) and (2) of section 18'.

No. 171, in page 167, line 26, leave out from 'England)' to first 'of in line 36 and insert
'there shall be substituted the following subsections—
(1) On a petition presented by the bank by virtue of this section, the court having jurisdiction under the Companies Act 1985 may wind up a recognised bank or licensed institution under that Act if—
(a) the institution is unable to pay its debts within the meaning of section 518 of that Act; or
(b) the court is of the opinion that it is just and equitable that the institution should be wound up;


and for the purposes of such a petition an institution which defaults in an obligation to pay any sum due and payable to a depositor shall be deemed to be unable to pay its debts as mentioned in paragraph (a) above.

(2) If a petition is presented by the Bank by virtue of this section for the winding up of a recognised bank or licensed institution which is a partnership (whether limited or not), the court has jurisdiction, and the Companies Act 1985 has effect, as if the institution concerned were an unregistered company within the meaning of Part XXI of that Act."

(1A) For subsection (4) of that section there shall be substituted the following subsection—
(4) In its application to Northern Ireland, this section shall have effect—
(a) with the substitution of a reference to the Companies Act (Northern Ireland) 1960 for any reference to the Companies Act 1985;
(b) with the substitution of a reference to section 211 of the said Act of 1960 for the reference to section 518 of the said Act of 1985;
(c) with the substitution of a reference to Part IX of the said Act of 1960 for the reference to Part XXI of the said Act of 1985; and
(d) with the insertion in subsection (2) after the words `(whether limited or not)' of the words 'then, notwithstanding section 348(d) of the Companies Act (Northern Ireland) 1960 (exclusion of partnerships etc. having less than eight members)'."

(2) In subsection (2) of section 19'.

No. 172, in page 167, line 40 leave out from second `any' to end of line 42 and insert
'"provision of Part XVIII to XXI of the Companies Act 1985 or any provision (other than section 93) of Part II of the Insolvency Act 1985: or".

(3) In subsection (8) of that section, for paragraph (a) there shall be substituted the following paragraphs—

(a) for the reference in subsection (2) to Parts XVIII to XXI of the Companies Act 1985 there shall be substituted a reference to Parts V, VI and IX of the Companies Act (Northern Ireland) 1960;
(aa) for any reference in subsection (5) to section 432 or 442 of the said Act of 1985 there shall be substituted respectively a reference to section 159 or 165A of the said Act of 1960:".'—[Mr. Fletcher.]

Clause 221

CROWN APPLICATION

Amendments made: No 257, in page 175, line 8 after `under', insert
'Chapter II of Part II or.—[Mr. Fletcher.]

Clause 222

CONSEQUENTIAL AMENDMENTS, TRANSITIONAL PROVISIONS, SAVINGS AND REPEALS

Amendment made: No 173, in page 175, line 30 after `III', insert `or IV'.—[Mr. Fletcher.]

Clause 223

SHORT TITLE COMMENCEMENT AND EXTENT

Amendments made: No 174, in page 176, line 2 at end insert—"() section 43,'.

No. 175, in page 176, line 6 leave out 'except subsection (8)'.

No 176, in page 176, line 8 leave out `(f) sections 209' and insert—
'(ea) section 209;
(eb) section (Disabilities on revocation of administration order against individual) (2) to (5);
(f) sections 210'

No 177, in page 176 leave out line 14 and insert—
`(a) section [Co-operation between courts exercising jurisdiction in relation to insolvency law]; '

No 267. in page 176, line 15 at end insert—

`(ba) section (Amendment of Restrictive Trade Practices Act 1976);'

No 178, in page 176, line 15 at end insert—
`(bb) section 208;'.

No 179, in page 176, line 18 after 'and' insert 'Part IV of'.

No 180, in page 176, line 20 leave out `and the Bankruptcy Act 1883' and insert
`the Bankruptcy Act 1883, the Bankruptcy Act 1914, the Criminal Law Act 1977 and the Civil Jurisdiction and Judgments Act 1982'.—[Mr. Fletcher.]

Schedule 1

TRIBUNAL ESTABLISHED UNDER SECTION 4

Amendment made: No 182, in page 178, line 30 at end insert—

'Supervision by Council of Tribunals

5.—(1) The Tribunals and Inquiries Act 1971 shall be amended as follows.

(2) In section 8(2) (concurrence required for removal of members of certain tribunals), after "6A" there shall be inserted "10A".

(3) In section 13(1) (appeals from certain tribunals), after "10" there shall be inserted "10.A".

(4) In Schedule 1 (tribunals under general supervision of Council), after paragraph 10 there shall be inserted the following paragraph—

Insolvency Practitioners

10A. The Insolvency Practitioners Tribunal established under section (Reference to Tribunal) of the Insolvency Act 1985."

Parliamentary disqualification

6.—(1) In Part III of Schedule 1 to the House of Commons Disqualification Act 1975 (disqualifying offices), there shall be inserted at the appropriate place the following entry—
Any member of the Insolvency Practitioners Tribunal in receipt of remuneration.

(2) A corresponding amendment shall be made in Part III of Schedule 1 to the Northern Ireland Assembly Disqualification Act 1975.'.—[Mr. Fletcher.]

Schedule 2

MATTERS FOR DETERMINING UNFITNESS OF DIRECTORS

Amendments made: No. 183, in page 178, line 32, at end insert—

'PART I MATTERS APPLICABLE IN ALL CASES'.

No. 184, in page 178, line 39, leave out from second `transaction' to end of line 41 and insert
`liable to be set aside under section 203 of this Act'.

No. 261, in page 179, line 13, leave out
`or section 77 of this Act'.

No. 262, in page 179, line 14, at end insert—

`PART II MATTERS APPLICABLE WHERE COMPANY HAS BECOME INSOLVENT

5A. The extent of the director's responsibility for the causes of the company becoming insolvent.

5B. The extent of the director's responsibility for any failure by the company to supply any goods or services which have been paid for (in whole or in part).

5C. The extent of the director's responsibility for the company entering into any transaction or giving any preference, being a transaction or preference liable to be set aside under section 94 of this Act or section 522 of the 1985 Act or challengeable under section 615A or 615B of that Act or under any rule of law in Scotland.

5D. The extent of the director's responsibility for any failure by the directors of the company to comply with section 77 of this Act.'.—[Mr. Fletcher.]

Schedule 4

PREFERENTIAL DEBTS

Mr. Gould: I beg to move, amendment No. 268, in page 181, line 1, leave out 'twelve' and insert 'six'.

Mr. Deputy Speaker: With this it will be convenient to take amendment No. 269, in page 181, line 17, leave out 'twelve' and insert 'six'.
No. 285, in page 181, line 27, leave out 'twelve' and insert 'six'.
No. 270, in page 181, line 32, leave out 'twelve' and insert 'six'.
Government amendment No. 190, in page 183, line 17, leave out 'twelve' and insert 'six'.

Mr. Gould: Only an hour ago, although it seems much longer, the Minister was claiming credit for reducing the ambit of Government preference. These amendments give him the opportunity to claim yet more credit, and I hope that he will seize it with alacrity.
More importantly, the amendments seek to achieve what is universally accepted as being a sensible uniformity of provision in this type of taxation. Having reduced the period of VAT preference to six months, a Minister in the other place went on record as saying that the rule should be the same for VAT as for PAYE and national insurance contributions. The Minister will be familiar with the arguments, which we rehearsed at some length in Committee. These amendments offer him another opportunity to carry out that simple principle. Once we have a six-month period for VAT, it is nonsense to have a different period for the other collector taxes.

Mr. Hanley: I remind the hon. Gentleman that this gives my hon. Friend the Minister another chance to agree with the Institue of Chartered Accountants in Scotland.

Mr. Gould: I am not sure that that point has all the force that the hon. Gentleman feels that it should have, given the experience that we all suffered on an earlier amendment, when he used a similar argument, which was brusquely rejected by the Minister. The arguments are familiar, and the Minister's reply may be familiar, but we at least live in hope.

Mr. Millan: I strongly support this series of amendments. It is nonsense that the Government, having conceded the six-montheperiod on VAT, are unwilling to concede it on PAYE. The Minister, as my hon. Friend the Member for Dagenham (Mr. Gould) has reminded us, has said that the Government have been generous to make all these concessions, but every concession has been squeezed out of them. They were reluctant to make any concessions on Government preference, but because of the pressure when the Bill was in the other place and in Committee, certain concessions have been made. Similar arguments have been made about the Bankruptcy (Scotland) Bill, which has been going through simultaneously. We welcome the Government concessions on VAT in Committee.
However, the Government's intention was to have VAT and PAYE treated on the same basis—that was how the Bill was drafted, and there is logic in that. There is now no reason why, having conceded the six-month period for VAT, the Government should not make a similar concession on PAYE.
It is not appropriate at this time of night to go over the arguments in detail, or even in principle. There must be a genuine concern among all those who are concerned in these matters, whether professionally or as Members of Parliament, about the position of small creditors in particular. There is a desire to reduce the preference of Crown creditors, in the interests of ordinary creditors who, in many a typical case, will be small firms for which the bankruptcy or liquidation of a debtor can be extremely serious. Even with the six-month period, the Crown will have a considerable preference that is not available to ordinary creditors. It would be logical and in the interests of small creditors if the Government would concede the six-month period for PAYE in the way that they have accepted it for VAT.

Mr. Fletcher: The right hon. Member for Glasgow, Govan (Mr. Millan) and the hon. Member for Dagenham (Mr. Gould) think that the Government have been reluctant in these matters. I confess that we did not table such amendments ourselves. Indeed, that is not likely ever to happen from these Benches on such matters. Nevertheless, I listened to the arguments objectively and constructively, and it was decided that the Government could give way. We have given way to a large extent on Crown preference. The following amendment confirms the extent to which the Government have given way on VAT.
Throughout our proceedings there has been a misunderstanding on pay-as-you-earn. It appeared in the Cork report, in the debates in the other place, and even in Committee and again this evening. The misunderstanding relates to the idea that PAYE is of a term similar to VAT. There is no question that PAYE has a 12-month accounting cycle, and that payments made during the year are paid to account, but the balancing of the book is done at the end of the year.
The hon. Member for Dagenham said that his arguments were familiar and that he expected to hear familiar ones from me. At least in that respect he has not been disappointed.

Mr. Gould: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Deputy Speaker: Order. As all the remaining amendments that are selected are Government amendments, unless any hon. Member wishes to raise any matters, with the leave of the House I shall put them together.

Schedule 4

PREFERENTIAL DEBTS

Amendments made: No. 186, in page 181, line 12, leave out from beginning to 'the' in line 13 and insert 'is referable to'.

No. 187, in page 181, leave out lines 14 and 15 and insert 'the relevant date'.

No. 188, in page 182, line 24, at end insert—
6. So much of any amount which—
(a) is ordered, whether before or after the relevant date, to be paid by the debtor under the Reserve Forces (Safeguard of Employment) Act 1985; and
(b)is so ordered in respect of a default made by the debtor before that date in the discharge of his obligations under that Act.
as does not exceed such amount as may be prescribed by order made by the Secretary of State'.

No. 189, in page 183, line 15, leave out
'in respect of which any value added tax is due'

and insert
'to which any value added tax is attributable'.

No, 190, in page 183, line 17, leave out 'twelve' and insert 'six'.

No. 191, in page 183, line 24, at end insert—
'and in this paragraph "prescribed" means prescribed by regulations under the Value Added Tax Act 1983'.

No. 192, in page 184, line 26, leave out
'(5) An order under paragraph 5'

and insert
'4.—(1) An order under paragraph 5 or 6'.

No. 193, in page 184, line 29, after '5', insert 'or 6'.—[Mr. Fletcher.]

Schedule 5

PROVISIONS CAPABLE OF INCLUSION IN COMPANY INSOLVENCY RULES

Amendments made:—

No. 194, in page 185, line 8, at end insert—

'Registration of voluntary arrangements

5A. Provision for the registration of compositions or schemes approved under Chapter II of Part II of this Act, including provision for the keeping and inspection of a register.'.

No. 195, in page 186, line 37, leave out 'are held in' and insert 'have been paid into'.

No. 196, in page 186, line 40, at end insert—
'16A. Provision as to the fees, costs, charges and other expenses that may be treated as properly incurred by the administrator or administrative receiver of a company.
16B. Provision as to the fees, costs, charges and other expenses that may be incurred for any of the purposes of Chapter II of Part II of this Act or in the administration of any composition or scheme approved under that Chapter.'

No. 197, in page 187, line 14, after 'company', insert
'or by the supervisor of a composition or scheme approved under Chapter II of Part II of this Act'.

No. 198, in page 187, line 19, after 'company', insert
'or by the supervisor of such a composition or scheme'.

No. 199, in page 187, line 27, at end insert—
'21A. Provision imposing requirements in connection with the carrying out of functions under section 7(5) of this Act (including, in particular, requirements with respect to the making of periodic returns).'.—[Mr. Fletcher.]

Schedule 6

AMENDMENTS OF 1985 ACT

Amendments made:

No. 200, in page 188, line 28. at end insert '7 or'


"(477(2E) Failing to send to registrar of companies a certified copy of authorisation to dispose of certain property.
Summary
One-fifth of the statutory maximum
One-fiftieth of the statutory maximum.".'.

No. 210, in page 191, leave out lines 5 and 6 and insert—


(3) For the entry relating to section 482(5) there shall be substituted the following entry—


"482(6) Failure to comply with obligation to submit statement of affairs to receiver.
1. On indictment
A fine.




2. Summary
The statutory maximum.
One-tenth of the statutory maximum.".'.

No. 211, in page 191, line 24, leave out from beginning to 'after' in line 25 and insert—
'(1) Section 518 (definition of inability to pay debts) shall be amended as follows.

No. 201, in page 189, line 25, at end insert—
'10A. In section 426(6) (liability of officer or liquidator of company for default in connection with the circulation of information as to a compromise), after the word "liquidator" there shall be inserted the words "or administrator"'.

No. 202, in page 189, line 25, at end insert—
'10B In section 478(6) [receiver to be appointed within one month of cessation of appointment of earlier receiver] at the end there shall be inserted the words—
and for the purposes of calculating the period of one month under this subsection no account shall be taken of any period during which an administration order under Part II of the Insolvency Act 1985 is in force".'.

No. 203, in page 189, line 32, at end insert—
'(1A) in subsection(1), after the words "secured by' there shall be inserted the words
a charge which, as created, was".'

No. 204, in page 190, line 6, leave out 'For subsection (1) of and insert '(1)'.

No. 205, in page 190, line 7, after 'court)', insert '
'shall be amended as follows.
(2) For subsection (1)'.

No. 206, in page 190, line 14, at end insert—
'(3) In subsection (3), after the word "provides)" there shall be inserted the words "and on any contract of employment adopted by him in the performance of those functions".

(4)After that subsection there shall be inserted the following subsections—
(4) For the purposes of subsection (3)(a) the receiver or manager is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment.

(5)Where at any time a receiver or manager so appointed vacates office—

(a) his remuneration and any expenses properly incurred by him;
(b) any indemnity to which he is entitled out of the assets of the company,
shall be charged on and paid out of any property of the company which is in his custody or under his control at that time in priority to any charge or other securit) held by the person by or on whose behalf he was appointed." '

No. 207, in page 190, line 31, after 'substituted', insert' the words'.

No. 208, in page 190, line 47, at end insert'—
' 17A.—(1) Section 476(1) of the 1985 Act (distribution of monies) shall be amended as follows.
(2) After the words "categories of persons" there shall be inserted the words "(which rights shall, except to the extent otherwise provided in any instrument, have the following order of priority)".
(3) In paragraph (d), after the word "remuneration" there shall be inserted the words "and any indemnity to which the receiver is entitled out of the property of the company.".'.

No. 209, in page 191, line 2, at end insert—
'(1A) After the entry relating to section 470(3) there shall be inserted the following entry—
(2) in subsection(1)(a);.

No. 212, in page 191, line 26, at end insert—

'(3) In subsection (1) (d) for the words from "(and, in determining" onwards there shall be substituted the words "as they fall due".

(4) After subsection (1) there shall be inserted the following subsection—
(1A) A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of us liabilities, taking into account its cotingent and prospective liabilities.".

No. 213, in page 192, line 12, leave out 'the Insolvency Act 1985' and insert 'that Act'.

No. 214, in page 193, line 30, at end insert—
`37A. After subsection (1) of section 625 (transactions in fraud of creditors) there shall be inserted the following subsection—
(1A) A person shall not be guilty of an offence under this section—
(a) by reason of conduct constituting an offence under subsection (1)(a) above which occurred more than five years before the commencement of the winding-up; or
(b) if he proves that, at the time of the conduct constituting the offence, he had no intent to defraud the creditors of the company."
37B. In section 626(1)(d) (failure to inform liquidator that false debt has been proved), for the words "for the period of a month to inform the liquidator of it" there shall be substituted the words "to inform the liquidator as soon as practicable".'.

No. 215, in page 194, line 14, at end insert 'the words'.

No. 216, in page 194, line 36, at end insert—
`46.—(1) In section 669 (inability of unregistered company to pay debts), at the end of paragraph (d) there shall be inserted the words "as they fall due".

(2) That section, as amended by sub-paragraph (1) above, shall be re-numbered as subsection (1) of that section and after that provision as so renumbered there shall be inserted the following subsection—
(2) An unregistered company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prespective liabilities.".'.—[Mr. Fletcher.]

Schedule 8

CONSEQUENTIAL AMENDMENTS

Amendments made:—

No. 217, in page 198, line 9, at end insert—

'The Bills of Sale Act (1878) Amendment Act 1882

1. In section 11 of the Bills of Sale Act (1878) Amendment Act 1882 (local registration of bills of sale), for the words "the London bankruptcy district as defined by the Bankruptcy Act 1869" and the words "the said London bankruptcy district" there shall be substituted, in each case, the words "the London insolvency district".'.

No. 218, in page 198, leave out lines 10 to 22.

No. 219, in page 199, line 19, at end insert—
`(10) In section 30(1) (interpretation), for the words "the Bankruptcy Act 1914" there shall be substituted the words "the Insolvency Act 1985".'.

No. 220, in page 200, line 44, at end insert
'and at the end there shall be inserted the words "or of a composition or scheme proposed for the purposes of Chapter II of Part II of the Insolvency Act 1985 being approved under that Chapter" '

No. 221, in page 201, line 28, after 'under,' insert `Chapter II of Pan II or'

No. 222, in page 202, line 5, leave out from `adjudged"' to end of line 7.

No. 223, in page 203, line 47, at end insert—

'The Conveyancing and Feudal Reform (Scotland) Act 1970

17A. In Schedule 3 to the Conveyancing and Feudal Reform (Scotland) Act 1970 (the standard conditions of a security). in standard condition 9(2)(b), for the words from "or an order" to "1925" there shall be substituted the words "or his estate falls to be administered in accordance with an order under section 216 of the Insolvency Act 1985".'

No. 288, in page 206, line 8, at end insert—
'(3A) In paragraph 2(2), for the words "in a case where the relevant event took place on or after the day of the passing of the Social Security Act 1985" there shall he substituted the words "in any other case".'

No. 224, in page 206, line 43, leave out from second `or"' to end of line 45.

No. 225, in page 207. line 15, at end insert
'and at the end there shall be inserted the words "or a composition or scheme proposed for the purposes of Chapter II of Pan II of the Insolvency Act 1985 is approved under that Chapter".'.

No. 226, in page 207, line 27. after 'under', insert 'Chapter II of Part II or'.

No. 227, in page 207, line 46. at end insert
'and at the end there shall be inserted the words "or a composition or scheme proposed for the purposes of Chapter II of Part II of the Insolvency Act 1985 is approved under that Chapter".'.

No. 228, in page 208, leave out lines 4 to 6.

No. 258, in page 208, line 12, leave out from `corporate), to end of line 15 and insert
'after paragraph (b) there shall be inserted the words "or
(c) on the holding of a creditors' meeting summoned under section 75 of the Insolvency Act 1985 (effect of insolvency on members' voluntary winding up);".'.

No. 230, in page 209, leave out lines 11 to 17.

No. 230A, in page 209, line 29, at end insert—

The Civil Jurisdiction and Judgments Act 1982

35A. After paragraph (b) of section 18(3) of the Civil Jursidiction and Judgments Act 1982 (judgments to which provisions relating to the enforcement of judgments within the United Kingdom do not apply), there shall be inserted the following paragraph—
("ba) a judgment given in the exercise of jurisdiction in relation to insolvency law within the meaning of section (Co-operation between courts exercising jurisdiction in relation to insolvency law) of the Insolvency Act 1985;".'.

No. 231, in page 210, line 24. at end insert—

The Housing Act 1985

38.—(1) The Housing Act 1985 shall be amended as follows.

(2) In paragraph 3(4) of Schedule 19 (suspension of condition as to residence), for the words "is administered in bankruptcy under section 130 of the Bankruptcy Act 1914" there shall be substituted the words "falls to be administered in accordance with an order under section 216 of the Insolvency Act 1985".

(3) In paragraph 5(3) of that Schedule (conditions affecting house purchased by means of advance), for the words "being administered in bankruptcy under section 130 of the Bankruptcy Act 1914" there shall be substituted the words "falling to be administered in accordance with an order under section 216 of the Insolvency Act 1985".'.

No. 232, in page 210, line 24, at end insert—

'The Administration of Justice Act 1985

39. In section 16(1)(g) of the Administration of Justice Act 1985 (conditional licences), for the words "and having obtained his discharge" there shall be substituted the words "and discharged".'.—[Mr. Fletcher.]

Schedule 9

TRANSITIONAL PROVISIONS AND SAVINGS

Amendments made:

No. 233, in page 210. line 31, after `(2)', insert 'or (3)'.

No. 234, in page 211, line 8, at end insert—
`4A. Section (Restriction on use of company names) of this Act shall not apply where the relevant company (within the meaning of that section) went into liquidation before the coming into force of that section. '

No. 235, in page 212, line 7, leave out '20' and insert `19'.

No. 236, in page 212, line 7, leave out '45' and insert '46'.

No. 237, in page 213, line 10, leave out 'in the 1985 Act to a winding-up order' and insert `to a winding up'

No. 238, in page 217, line 42, at end insert—
'(2) References in sub-paragraph (1) above to setting aside a transaction include references to the making of any order which varies or reverses any effect of a transaction.'.—[Mr. Fletcher.]

Schedule 10

REPEALS

Amendments made:

No. 239, in page 218, line 5, column 3, at beginning insert—



"In Section 302(1), the words "or liquidator". '

No. 240, in page 218, line 16, at end insert—


'37&amp;38 Vict. C. 42. 
The Building Societies Act 1874.
In section 32, the words "under the supervision of the court".


6&amp;7 Eliz. 2 c. 45
The Prevention of Fraud (Investments) Act 1958.
In section 4, in subsections (2)(b) and (4)(a), the words "or under the supervision of".


1975 c.75.
The Policyholders Protection Act 1975.
In section 5(2), the words "or subject to the supervision of'.'.

No. 241, in page 218, line 16, at end insert—


'1982 c.50.
The Insurance Companies Act 1982.
In section 57(1), the words "or under the supervision of'.'.

No. 242, in page 219, line 40, column 3, leave out `Sections 611 to 618' and insert—



'Sections 611 to 615. Sections 616 to 618.'

No. 243, in page 219, line 44, column 3, at end insert—
'In section 625(1), the words "with intent to defraud creditors of the company" and the words "with that intent.".'.

No. 244, in page 220, line 21, column 3, leave out 'and "or 609"' and insert
'the words "or 609" and the words from "or appointing" onwards'.

No. 245, in page 221, line 2, column 3, at end insert—
'except sections 121 to 123'.

No. 246, in page 222, line 12, column 3, at end insert—



'Section 13A(2)(b).'

No. 247, in page 222, line 35, at end insert—


'1983 c.19.
The Matrimonial Homes Act 1983.
Section 2(7).'

No. 248, in page 222, line 39, at end insert—


'1985 c.00.
The Housing Act 1985.
Section 121 to 123.'

No. 249, in page 222, line 39, at end insert—


'1985 c.00.
The Administration of Justice Act 1985.
In section 16(1)(f), the words "or while a receiving order is in force against him".




Section 17(2)(b).'.

No. 250, in page 223, line 3, at end insert—


'4&amp;5 Geo.c.59.
The Bankruptcy Act 1914.
Sections 121 to 123.'

No. 251, in page 223, line 25, at end insert—



'1977 c. 45.
The Criminal Law Act 1977.
Section 38(5).'.

No. 252, in page 223, line 38 at end insert—


'1982 c. 27
The Civil Jurisdiction and Judgements Act 1982
In section 18(3)(c), sub-paragraphs (i) and(ii).'.

No. 253, in page 223, line 44, column 3 at beginning insert—



'Section 570.'.

No. 254, in page 223, line 47, column 3 at end insert—



'Section 666(7)".

No. 255, in page 223, line 52, column 3 leave out 'and'.

No. 256, in page 223, line 54, column 3 at end insert
'and to sections 18 and 19(8) (a) of the Banking Act 1979'.—[Mr. Fletcher.]

Order for Third Reading read.—[Queen' s Consent, on behalf of the Crown, and Prince of Wales's Consent, signified.]

Mr. Fletcher: I beg to move, That the Bill be now read the Third time.
We have made a contribution to the many problems raised during the debates in this House and the other place. I am satisfied that the Committee in particular contributed substantially to the quality of the legislation. As I do not wish to embarrass Labour Members, may I say quietly that I am grateful for their constructive approach. I hope that that augurs well for the legislation on financial services, which the Government hope to introduce next Session. I am also extremely grateful to my hon. Friends who were equally objective and constructive in proceeding with the legislation.
The Government set out with many objectives, which have been debated. However, I am happy to say that we still have licensed insolvency practitioners. We have fresh powers to disqualify unfit directors, powers to reduce limited liability through wrongful trading, and a new, helpful and constructive administration procedure. I hope that insolvency practitioners and the commercial world generally will find the Bill greatly advantageous to them. I hope that the poor bankrupts who find themselves in trouble over a relatively small sum will find the new simplified procedures helpful.

Mr. Gould: The Minister's generous remarks are typical of the good humour with which both the Committee and the House have dealt with the Bill. Just as he thanked his hon. Friends, I should like to thank mine, particularly my hon. Friend the Member for St. Helens, South (Mr. Bermingham) for the great support and work that he has done in Committee and throughout the Bill's passage.
None of those agreeable aspects of the Bill's proceedings will deter me from making one final point that I am sure the Minister would expect me to make. We have had to deal with the Bill in the most difficult of circumstances. Some of his hon. Friends totalled up the number of amendments made throughout the proceedings., and came to the grand total of 1,000. I confess that I did. not do that sum, but it is true that we had over 400 Government amendments in Committee and another 200 on Report. That is virtually unprecedented, and even more


remarkable when one considers that we are dealing with a Bill on a subject that has been under consideration since 1977. One cannot help but think that something went wrong somewhere and that the consultation procedures were inadequate for presenting a Bill of this complexity. The consequence was that the parliamentary procedures for scrutinising this important and complex measure were stretched virtually to breaking point. At times some of us felt almost overwhelmed by the volume of amendments and new clauses. I am sure that even the Minister found it difficult at times to keep pace with what was happening.
The consequence of that is that, while the Minister is right in saying that the Committee can take credit for having improved the Bill, the Bill is still not—and I am sure that my hon. Friends agree with me in this respect—in as good shape as it should have been. We have done what we can in the time available and with the resources available to us, but in the end the Bill still needs considerable amendment. It is unfortunate that we may yet again have to rely on another place to achieve that further refinement of the Bill. If that is so, I fear that the Government have no one but themselves to blame. On the other hand, the Minister is both generous and correct when he says that the Committee has done a good job. I hope that in that respect at any rate we have made it a better Bill than it was when it came to us.

Mr. Hanley: I must crave the indulgence of the House while I make a few remarks on Third Reading.
I do not apologise for doing so, because I believe that there should be on the record certain matters that have not been discussed tonight. My hon. Friend the Minister has listened hard, often and widely. I know that we are all grateful for that. We are grateful for the careful consideration that he has given to our pleas and the careful consultation that he has gone into, particularly with his officials. If only that consultation had happened before report or even Third Reading, perhaps 1,000 Government amendments would not have been necessary. Maybe there would have been 1,000 paragraphs in a working party report. On this Bill, the case for a draft Bill on a technical matter has been proved.
I am grateful to my hon. Friend for the progress that we have made on preferential creditors. He is right in saying that the Government should be congratulated on trying to help small unsecured creditors. It was the Government's initiative that helped in removing corporation tax, and particularly the pernicious charge of local authority rates. Indeed, tonight the Government could have reversed the progress that we had all made on VAT being brought down from 12 to six months. The Government deserve some credit for accepting the Committee's view. In doing so, the Government will greatly help small firms that are creditors of those who go into liquidation.
Therefore, we should be grateful for many small mercies in the Bill. However, on the record should be certain matters on which my hon. Friend the Minister and the Parliamentary Under-Secretary of State, my hon. Friend the Member for Rossendale and Darwen (Mr. Trippier), agreed to come back to the Committee, having considered them. If the Bill is going to another place, we should put those matters to it.
First, on clause 7 the Minister undertook to consider whether provision with regard to the frequency of misconduct should be incorporated in a practice direction or in the rules. If the Government have dealt with any of those matters, I am sure that they will understand that it is difficult to find them in the vast volume of amendments.
Secondly, my hon. Friend the Minister said that he would consider provisions to enable a disqualified director who had been rehabilitated to apply to have the disqualification terminated. That is in clause 13. In clause 34 the Minister said he would consider making it a requirement for information to be given to the workforce. That has been mentioned tonight. but there was no progress. In clause 68, the Parliamentary Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Rossendale and Darwen (Mr. Trippier), agreed to reconsider whether early dissolution should occur where an administrative procedure is in place. In clause 70 the Parliamentary Under-Secretary of State—my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher)—said that he would investigate the concern of the hon. Member for Dagenham (Mr. Gould) about there being no provision to deal with the possible lack of a quorum at the final meeting.
In clause 81, the hon. Member said that he would consider the suggestion by the hon. Member for St. Helens, South (Mr. Bermingham) that deposit payments should have preferential status. That was discussed tonight, but it is still a matter of major concern. In clause 97, my hon. Friend the Minister agreed to consider from my hon. Friend the Member for Tynemouth (Mr. Trotter) that the appointment of an administrative receiver should be recognised with regard to floating charges. In clause 105, he agreed to consider the suggestion by the hon. Member for St. Helens, South that the court should have power to give a direction about dealings with assets during the period of an interim order.
You will be pleased to hear, Mr. Deputy Speaker, that there are not many more, but I want them on the record. In clause 108 the Minister agreed to think about the suggestion by the hon. Member for Tynemouth that courts should have power to make a bankruptcy order immediately if attempts to have a voluntary agreement fall with regard to the decision of creditors meetings.

Mr. Fletcher: Where we were able to table an amendment in accordance with commitments, we did so. Where we could not, we wrote. I certainly wrote to hon. Members explaining why we could not follow up commitments that I had given in Committee.

Mr. Hanley: Many of these matters raised in Committee were of interest to more than the hon. Member who raised them. Having heard that assurance from the Minister, I should be very grateful if I could have sight of some of the letters, and I will undertake to the Minister to write to the hon. Gentleman concerned and ask for such information. I am merely trying to put these on the record so that the other place may consider them. I am about two thirds of the way through my list, and if their lordships are sitting on the edges of their red lined benches dying to know the other items, I will in turn write to them and give them the other seven items about which I have had no response.

Mr. Bermingham: For the last time in this Bill, I will come to the aid of the Minister and reassure the House that


I received a letter in respect of each and every one of the matters I raised, and the letters were both helpful and explanatory. I am sure that my hon. Friend the Member for Dagenham (Mr. Gould) will join with me when I say how grateful I am to the Minister for the way he replied in these matters.
We leave this Bill as we began it. It has taken 100-plus years to get this far in improving insolvency law, but perhaps we have laid a few markers on the road. I hope it will not be another 100 years before we begin to develop the ideas in the Bill, many of which were canvassed in Committee. Parliamentary draftsmen often say, "It cannot be done," but where there is a will there is a way. The markers are on the road and many of us who took part in the debate on the Committee stage of this Bill know well where we want those markers to take us.
We say gently to this Government and to successive Governments that once this Bill goes into operation and flaws are found, those of us who are interested in the subject will bring those flaws back for correction. We all want to have a civilised insolvency law to remove the cruelty of the Riley case. We want to be able to catch and stop the war referred to tonight. or stone the gnome as I kept referring to it in Committee. If we are going to do that, we have to accept that insolvency law must develop with changing times, with the changing concepts in industry, and with changing methods in the service industry. It cannot be allowed to stay the same from 1880 until 1980 or from 1914 until 1985. We have to update the law, and we have to take on board the new ideas, commercial and otherwise, that exist.
For all those who served on the Standing Committee, the Bill has been an interesting exercise. I hope that for those who have had to listen to us it has not been too boring an exercise. To those who helped members of the Committee from without this place and in the various professional bodies we all owe a deep debt of thanks. Much of what we portrayed in the Committee came from their advice and guidance, and it is right that we should place on the record our gratitude for the great help that we get, which is voluntarily and freely given to us.
Perhaps the House of Lords can push the Bill just a little further down the tram tracks, and perhaps the gremlins will not get in the way too much.

Question put and agreed to

Bill read the Third time and passed, with amendments

STATUTORY INSTRUMENTS, &C.

Motion made, and Question put forthwith pursuant to Standing Order No. 79(5) (Standing Committees on Statutory Instruments, &amp;c.),

CONSUMER PROTECTION

That the draft Food Imitations (Safety) (Amendment) Regulations 1985, which were laid before this House on 21st June, be approved.

MERCHANT SHIPPING

That the draft Merchant Shipping (Fire Protection', (Ships Built Before 25th May 1980) Regulations 1985, which were laid before this House on 5th July, be approved.

That the draft Merchant Shipping (Fire Appliances) (Amendment) Regulations 1985, which were laid before this House on 5th July, be approved.

That the draft Merchant Shipping (Fire Protect:Ay1) (Amendment) Regulations 1985, which were laid before this House on 5th July, be approved.

That the draft Merchant Shipping (Grain) Regulations 1985, which were laid before this House on 18th June, be approved.

That the draft Merchant Shipping (Radio Installations) (Amendment) Regulations 1985, which were laid before ibis House on 18th June, be approved.

AGRICULTURE

That the draft Agriculture Improvement Regulations 1985, which were laid before this House on 8th July, be approved.

That the Agriculture Improvement Scheme 1985 (S.I.. 1985, No. 1029), dated 5th July 1985, a copy of which was laid before this House on 8th July, be approved.—[Mr. Boscawen.]

Question agreed to.

DISCHARGES OF DANGEROUS SUBSTANCES

Motion made, and Question put forthwith pursuant to Standing Order No. 80(5) (Standing Committees on European Community documents),
That this House takes note of European Community Document No. 4519/85, a proposal for a Council directive on the discharge of certain dangerous substances into water, and affirms the need for a Directive to deal with pollution by substances meeting the List I criteria set out in Council Directive 76/464/EEC, and which requires monitoring for the levels of those substances in the aquatic environment, irrespective of source.—[Mr. Boscawen.]

Question agreed to.

Orders of the Day — Mr. Michael Starrs (Mobility Allowance)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boscawen]

Mr. Tom Clarke: I am particularly grateful for this opportunity to debate the case of Michael Starrs, and I welcome the interest which the Minister's Department has shown and look forward to the hon. Gentleman's response.
Michael Starrs is a father, aged 47. Clearly he is very severely disabled and an extremely ill man. Until his first serious illness struck in 1965, the year when a fateful operation for a duodenal ulcer was performed, Michael was extremely fit and far from work shy. As a national service man, he served in the 15/19 King's Royal Hussars in Northern Ireland in the late 1950's. Apart from that period, and until his illness, he worked as an apprentice and then as a welder in Tollcross foundry.
Prior to his illness, Michael's average weight was 10 stone 7 pound. Now it is just 8 stone. He has twice applied for mobility allowance and had been refused on both occasions.
Tonight I have to ask the Minister why and, grateful though I am that the hon. Gentleman is present to reply to the date, I have to tell him that I shall listen very carefully, as will my constituents, to his reply, because it is a case which has baffled many people and continues to baffle me.
I have to ask the Minister why there should be a refusal in the case of a man who is qualified for and has been given a wheelchair by the National Health Service, presented by Belvedere hospital. Why should there be a refusal in the case of a man who was informed by letter on 8 March 1983 by the Ministry of Transport that the restricted condition of his legs meant that his driving licence would cover hand controls only? Why should a man who is fed intravenously or who is otherwise dependent on baby food or a liquid diet be judged so harshly? Why, when a man suffers from such obvious fatigue that his walking is considerably impaired and when it would be cruel in the extreme to make demands beyond his present limited capacity, is this not taken into account?
Those questions are also being asked by my constituents, 3,500 of whom have petitioned me to insist on a full inquiry into the whole of Michael Starrs' case, including his medical history, and some of those people themselves receive mobility allowance. Some of them are the same constituents who got together in a local social club and presented Michael with a hand-controlled car, which gives him the little comfort that he has when he can afford to run it.
Last year the local newspaper in my constituency, the Airdrie and Coatbridge Advertiser, published a prominent article headed
Michael's 19 years of hell.
It reflected, quite properly, the views of those in my community and strong views generally that those involved in social security have not yet found a satisfactory conclusion.
In March 1965, at the age of 26 years, Michael was admitted to Hairmyres hospital, East Kilbride. He underwent an operation for a duodenal ulcer. From that date until now he has never had a normal meal because his

digestive system cannot cope with one. As it was not in his nature to be voluntarily without work, he applied for and was given a light job in the Gartcosh strip mill from 1965 to 1970. However, even that became too much for him and his consultant wrote to British Steel and told them so. After a lengthy period as an out-patient and sometimes as a in-patient, yet another operation, the third in all, took place in 1970 to deal with the complications which had arisen from the earlier operation in 1965. It is a matter of medical history that a piece of silk, which lingered from Michael's first encounter with surgery, had to be removed. Michael tried to resume work but found that his condition had deteriorated so badly that he experienced a burning sensation every time that he attempted to swallow, a condition which persists to this day.
Michael finally accepted early redundancy and left his employment with £800 for his 20 years' service. With that he was left to face the future. Michael has existed on invalidity benefit since then. It is not surprising that his faith in social services has been somewhat shattered. Astonishing though it may seem, in 1976 he was called before a medical tribunal and his invalidity benefit was discontinued. He appealed to the health commissioner, who restored it. That establishes that tribunals are not always right, and certainly have not been so in Michael's case.
The first tribunal that heard Michael's application for mobility allowance sat on 13 October 1980. It concluded:
We have considered the evidence and observed the claimant walking out of doors. He walks slowly with a hesitant gait and with the aid of a stick hut without apparent pain or severe discomfort.
The best person to make a judgment on his ability to walk and his discomfort is Michael. On that evidence, which is supported by all who know him, there is and has been considerable discomfort. I find it incredible that the tribunal could have reached such a conclusion.
I gave evidence at the second tribunal hearing in January. It had before it a great deal of information, including the opinion of Dr. Ian Bone, a consultant neurologist, who said:
'He walks in an extraordinary manner, bent forward as though walking on a treadmill. The walking is symmetrically abnormal but becomes more bizarre when the stick is held in the left hand. On general examination, he is a small emaciated man.
Having heard the evidence and made my contribution to the tribunal. I believe that my constituent suffered in the conclusions reached because of aconflict of medical evidence about his condition. There were several diagnoses from various doctors. Doctor No. 1 said that Michael suffered from multiple sclerosis, doctor No. 2 said that it was
post-gastric surgery debility: ataxia
and a third doctor concluded that Michael's condition was caused by a psychosomatic illness.
The doctor who knows most about the case is Mr. Starrs' own medical practitioner, Dr. Edward McCabe, a man who does not use words lightly and thinks carefully before he reaches a conclusion and offers it for consideration. He said:
Mr. Starrs suffers from a difficulty in locomotion which I feel qualifies him for a mobility allowance.
That is the unreserved view of a doctor who knows Michael and has seen the condition develop and Michael's health deteriorate.
Unfortunately, the tribunal did not share that opinion. It concluded:


We have observed the claimant walking a distance in excess of 100 yards outside. The claimant can walk such a distance, as was confirmed by Mr. Clarke, slowly and gingerly with frequent short pauses for no apparent reason and without any evidence of distress.
I found that conclusion astonishing and I regret to have to say that it was a distortion of the evidence that I gave. I made it clear that on a very cold winter's morning I walked 100 yards with Michael Starrs and I had to stop with him on five or six occasions. He was unable to continue and was caused considerable distress. I was cold and Michael, in his condition, must have felt much colder. How the tribunal could have reached that conclusion is a mystery which still invites an explanation.
I have discussed all the papers in the case and the facts known to me with my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who introduced the legislation that provided the mobility allowance. He would have spoken in the debate. but unfortunately he has to be out of the country on parliamentary business. However, he has encouraged me to say that he finds it astonishing that Michael Starrs has not been given a mobility allowance. He would have supported my case, and I find that support a great comfort.
On the basis of the evidence in this case, there must be a suspicion that applicants for the allowance, at least in Scotland, if not elsewhere, are being subjected to more stringent tests than many people would feel are desirable. I know of the independence of adjudication authorities, yet there is a clear injustice in the case of Michael Starrs and it worries me that similar injustices might be occurring in other cases.
If the Minister tells the House that he cannot intervene in the case, there will be considerable disquiet amounting, yes, to disgust in Coatbridge and throughout my constituency.
I invite the Minister to share my contempt for the procedures which have condemned Michael Starrs to immobility and dependence whereas with the allowance which the thousands of people who know him think he should have he could be mobile and independent.
I cannot believe that a man and his family who are experiencing such stress and pressure will not be compelled later to make even greater demands upon the National Health Service. No saving is made by not granting the allowance.
I say to the Minister and to the adjudicating authorities that I cannot accept their view. I cannot accept that Michael Starrs should be treated in this way. The fight will continue beyond this debate.
I sought the opportunity to ensure that we had an Adjournment debate on the issue because I profoundly believe that the case speaks for itself and invites correction. I should be delighted if the Minister responded positively, not just in the interest of Michael Starrs and his family, important though that is, but in the interests of humanity.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney): I am grateful to the hon. Member for Monklands, West (Mr. Clarke) for raising the case tonight. I congratulate him on the eloquence and sincerity with which he put the case. He has pursued Mr. Starrs' claim for mobility allowance with great assiduity for some time.
It will be no surprise to the hon. Gentleman to learn that great as my sympathy is for Mr. Starrs and his difficulties, I cannot make any decision on his claim. I hope that the hon. Gentleman will understand.
The reason is that mobility allowance claims, in common with claims for other social security benefits, are decided by independent adjudicating authorities. An adjudication officer examines a case in the light of a medical report prepared by a doctor, in the first instance. If the claimant appeals, a medical board reconsiders the case. There is a further right of appeal to a medical appeal tribunal whose decision is final on the medical questions.
I accept that mistakes can be made at any stage in that process and changes in decisions can be made. However, over many years under all Governments the independent nature of the adjudicating authorities has been preserved. Ministers cannot intervene. I recognise the hon. Gentleman's argument about the view of a particular doctor, but I hope that he will accept that the views which we collect through the medical appeal tribunal system offer a wide range of experience and knowledge which must be accepted as being valid.
A decision by a medical appeal tribunal can be challenged only by way of an appeal on a question of law to the Social Security Commissioner. Neither Ministers nor officials of the Department can decide claims, nor cart they alter or try to affect decisions given by those authorities.
Before I deal with the specific case of Mr. Starrs it might be helpful if I explain briefly the medical qualifying conditions for the allowance.

Mr. Clarke: At the second tribunal the chairman was Queen's Counsel. If Michael Starrs appeals, can he be represented by a Queen's Counsel and have legal aid?

Mr. Whitney: I would need to write to the hon. Gentleman on that precise point. Mr. Starrs has the right of appeal, but I would not want to mislead the House on the detail.
The medical qualifying conditions were set out in 1976. The hon. Member for Monklands, West referred to his colleague the right hon. Member for Manchester, Wythenshawe (Mr. Morris), who was intimately connected with the introduction of the benefit in 1976. Careful consideration was given to the conditions in the light of the resources available and the need to provide a cash allowance which would be a worthwhile contribution towards the additional expenses which disabled people incur in getting about. It was decided that the allowance should be available to those severely disabled people who are unable, or virtually unable, to walk due to physical disablement.
Virtual inability to walk is not defined in the legislation, but regulations lay down the kind of factors that are to be taken into account in assessing a claimant's walking ability. These include the distance a claimant can walk and the speed, length of time and manner in which he can make progress without severe discomfort.
I must emphasise that the adjudicating authorities are responsible for the interpretation of these conditions and for their application in individual cases. They can, for instance, decide that a mental handicap has a physical cause or that its effect is to produce a physical disablement but the test for the allowance remains one of walking ability.
The first claim by Mr. Starrs was received on 13 October 1980. The decisions, in turn, of the insurance officer, medical board and the medical appeal tribunal were that he was not unable or virtually unable to walk and thus not entitled to the allowance. He was refused leave to appeal against the decision of the medical appeal tribunal on a question of law by both the medical appeal tribunal and the social security commissioner.
Mr. Starrs subsequently made a fresh claim for the allowance which was received on 1 June 1983. Again, an insurance officer, medical board and medical appeal tribunal, in turn, decided that he was not unable or virtually unable to walk. He has now sought leave to appeal to the social security commissioner on a question of law and we currently await the decision of the medical appeal tribunal chairman on this application. If such leave is refused, Mr. Starrs will still have the opportunity of seeking leave direct from the commissioner.
The hon. Gentleman will thus see that a final decision has not, as yet, been given on the claim made by Mr. Starrs and I cannot, of course, anticipate the likely outcome.
The question whether the qualifying conditions are satisfied are considered as at the date on which the claim is received by the Department. If Mr. Starrs considers that his walking ability has become worse since he made his

last claim, it is open to him to make a fresh claim which will be considered in the light of his walking ability at the time that it is received.
I recognise that Mr. Starrs' case had taken a long time to resolve. It is inevitable that such cases should be protracted because of the importance both for the claimant and the Department of gathering all the facts, of obtaining medical reports and of considering all the evidence carefully. However, we have been concerned about the length of time cases like Mr. Starrs' take and we have been considering what we can do to speed up the process of adjudicating on claims. I am glad that we have made some progress, although there is more to do.
Mr. Starrs' claim has not beeen finally decided. He has applied for leave to appeal to the social security commissioner against refusal of mobility allowance. In any case, if the decision goes against him and Mr. Starrs believes that he now satisfies the criteria, he can apply again.
I have carefully noted the points made by the hon. Member for Monklands, West and shall write to him on the specific point he raised. He has argued Mr. Starrs' claim cogently and effectively. I shall note his continuing interest and keep closely in touch with him about this case. The lessons that may be learnt about the handling of this case will be taken to heart by the Department.

Question put and agreed to.

Adjourned accordingly at six minutes to Twelve o' clock.